Aquilla Informer: Issue 2010/44

What is this newsletter about:

This Weekly publication is issued by Aquilla Advisors cc (Specialising in Business Solutions to SMME's in all the various aspects of business) and Aquilla Financial Solutions cc (Specialising in Financial Services Advice and Intermediary Services).

It contains information useful to business owners, business advisors  and managers

If you want to comment on anything in this newsletter, send us a mail to: .  For more information on Aquilla Advisors , go to www.aquillaadvisors.co.za. Feel free to pass on this newsletter to other interested parties. You'll find the subscribe - unsubscribe function at the end.

In the week ahead, it is time for the Interim Employer reconciliations with SARS to be completed, as well as the Currie Cup final over the weekend to crown this year's champions. One thing is for sure, there will be a new champion and they will be from the Coast. just needs to be decided which coast.

Have you remembered that you need to hand in a compulsory logbook for all your kilometers travelled at the end of this tax year if you want to claim against your car allowances. If you have not kept that and need some help, contact us for a free excel or open Calc spreadsheet to assist you.

This week we discuss:

1. CIPRO Annual Company Returns (Is Your Company Legal)
2. TAX Q&A's
3. Group Thinking Stifles Creativity
3. Filezilla -  Open Source Software
4.  Occupational Health Care
Wynand Louw
Aquilla Group

Business

OWNERS of CCs and Pty companies have had more than enough time to comply with the law and  to send in their "company returns" or risk being deregistered. Many companies according to CIPRO have now been deregistered by CIPRO from their database.

CIPRO have said annual returns were re-introduced as a result of poor compliance on the part of businesses to update their information as required by law on their Company registrations.

"The data will help the Registrar's office who requires constant and vigilant updating to ensure that it is relevant, accurate and up to date."

Companies and CCs must lodge a return every year, not later than the end of the month in which they were registered. The new return kicked in from 1 May 2005 for companies and 1 September 2008 for Closed Corporations. It must be submitted together with a prescribed fees. If your information is outdated or outstanding on your company documentation, you will be required to complete a CK2 and CK2A for Cc's and relevant CM documents for a company. Please remember that as of August this year you will also have to submit proof of residence for each member/ director as well as a certified copy of the ID and each director / Member have to sign in person.

Companies is only allowed to lodge annual returns electronically. Cipro will not accept or receive paper documents or cash from companies. This means that your company must open an account  with CIPRO and deposit money to that account to do online processing and payments for these submissions.

Businesses that are deregistered will have to go through the hassle of reregistering and pay and submit all outstanding annual returns.  Please make sure that your company is still registered by checking the CIPRO website. It is your responsibility to regularly verify and check your company's information or to notify the relevant authorities about any changes.

If your company was deregistered you are operating without the protection that the legal entity offers you and your co-shareholders / members. You will then each be responsible for any claims from creditors in your personal capacity.

To find out if your company is still registered, go to CIPRO website or  Contact Cipro at 0861 843 384, or contact our offices who will gladly assist you in the process. It will unfortunately be a paid service.

Taxation

Key Dates:

29 October 2010
Interim PAYE reconciliations

26 November 2010:
Non-provisional: Individuals and Trusts

31 January 2011:
Provisional: Individuals and Trusts
Deadline for Postal submissions/SARS Drop box

 

Here are some of the key issues readers  have raised over the past few weeks:

1. SARS provides for an allowance for future expenditure on contracts

Q:

My company receives large grants and funds from contracts, however the expenses will only be reflected later as the contract runs for many months. I have received quite large sums up to this month, my year-end month, but will only have the expenditure over the next few months. As SARS expects us to show revenue of payment or an invoice (whichever is earlier), I will have to show the revenue. But will I be allowed to deduct the expenditure occurred after year-end in this tax year? 

A:

You could consider using the Section 24C allowance. This section provides for an allowance for future expenditure on contracts.

Prepayments similar to your circumstances often happen in the construction industry. This assists in cash flow problems caused by a tax liability on the prepayment when the deductible expense will only  be incurred in a future period. The prepayment will form part of gross income. The Commissioner can grant an allowance at his discretion.

The main rules are that the future expenses related to the prepayment  will have to be deductible expenses (under Sections 11(e), 11(o), 12B  or 12C), and the expenses have to be part of a contractual commitment  relating to the prepayment.

In practice the Commissioner should grant you the allowance if you can satisfy him that the amounts received were received in terms of a contract; and the future expenses will be deductible. In practice the Commissioner will apply the gross profit percentage on  the contract calculation method to determine the future costs.

2. Foreign pensions are exempt from income tax

Q:

I'm an SA resident earning a pension from the UK, which I contributed to while working and living in the UK. Do I need to declare it and pay tax on it?

A:

A pension received by or accrued to any resident of the Republic from a source outside the Republic will be exempt income in the Republic (Section 10(1)(gC)).

3. 5 circumstances in which a business qualifies as a Personal Services Company

Q:

We have a company and the income exists in consulting fees. There are 4 employees employed by the company, other than the owner: a  receptionist, 2 accounting clerks and 1 other employee.

There is a difference of opinion between me and the auditor who will do the audit of the financial statements. The auditor is of the opinion that the company falls into the category of a personal service company and certain expenses will not be allowed as expenses and that the income of the company is subject to a tax rate of 35%.

My opinion is that it is not a personal service company because the  income from one contract does not exceed 80 % of the income of the company. Could you please give me clarity on this issue?

A:

For me to express an opinion I would have to review this in more detail, but it would appear that the company is not a personal services company (PSC) by definition, nor by intent. This definition is to prevent the avoidance of employees' tax, and not to hinder or levy additional tax on trades.

There are five big 5 factors I like to look at when determining whether a business is a personal services company. The services must be rendered on behalf of the company in one of the following five circumstances:

• The person who renders the service would be regarded as an employee of the principal if it was not for the PSC; or

• The person who renders the service is subject to the control and supervision of the principal as to the manner in which, or hours during which, the contractors'  duties are performed; or

• The amounts payable for the services rendered consist of earnings of any description, which are payable at regular daily, weekly, monthly or other intervals; or

• More than 80% of the income of the PSC results from the services rendered to any one client or associated institutions.

• But excluding a Company or Close Corporation that throughout the year of assessment, employs more than three full-time employees (other than shareholders, members or connected persons) who are on a full-time basis engaged in the business of the Company/Close Corporation of rendering any service.

At first blush it does not appear as if you fall into one of these categories.

Remuneration payable to  a PSC by the principal is subject to PAYE. The tax deductions of a PSC are limited to the amount of the remuneration paid to its shareholders or other employees.The income of a PSC is taxed at a rate of 35%.

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As a manager, you are approachable, encouraging, and maintain a supportive culture in your organisation. Still, some of your employees are reluctant to share their ideas. Perhaps you have a case of “group think” quieting your meetings.

When group members feel they have a great idea and choose not to share, they might be surrendering to what Michael Ray calls the “Voice of Judgment” – the inner voice that uses fear of the unknown to stifle creative input. When you have a case of “group think,” it is important you find ways to encourage your employees to push this voice to the side when they feel they have a valuable insight to share.

We are using a method called Participlan very successfully in planning sessions, strategy sessions, feedback sessions and the like. The method is totally anonomous and non threatening for all levels of employees in the same group.

For a simple demonstration or to acquire our help in your next facilitation meeting, call us at our office or email us on for a free nonobligatory quotations.



When employees are discouraged, they can be cancerous to the workplace. As their own production goes down, they often attempt to contaminate others around them. Discouraged employees can be easily identified. When you observe the signs, you should discover the source of the employee’s dissatisfaction and then customize a solution. While the best approach is to prevent your employees from getting discouraged in the first place, the same skills can be used to provide the treatment.

To help your managers to identify and assist these employees, please give our office a call or send a mail to Barbara at .

Open Source Software Solutions

For training, information or assistance please contact us on:

Financial Solutions

OCSACare

This is a low cost product you can introduce as a benefit to your staff and volunteers, with tremendous benefits to your organisation.

It is an occupational health solution designed for the South African labour market to keep employees who were previously excluded from any form of private healthcare, healthy and productive.

 

The Gold Package:

For only R178.00 per employee per month it provides your employees with the option to visit any CareCross Doctor, Dentist or Optometrist without co-payments for these services. This option is available to groups of 10 or more.

The Silver Package:

For only R145.00 per employee per month it provides your employees with the option to visit any CareCross Doctor, without any co-payments for this service. This option is available for individuals and groups fewer than 10.

For more information, contact us on

 

Thank you for sending in your questions. Please continue so, and we will answer them as best possible in our Q&A section.

 

Have a great week.

Aquilla Informer Team