The IT14SD is a supplementary declaration in which a company must reconcile Income Tax, Value-Added Tax (VAT), Pay-As-You-Earn (PAYE) and Customs declarations after the initial submission of the Return of Income (IT14/ITR14), for the applicable financial year-end, as specified in the verification letter.
In order to complete the IT14SD, you must have the following previously submitted returns and declarations for the relevant financial year-end:
- Company income tax return (IT14/ITR14)
- Value-Added Tax Declarations (VAT201s)
- Monthly Employer Declaration (EMP201s)
The IT14SD is designed to reconcile the following types of tax returns with the relevant line items in the IT14 income tax return submitted to SARS:
- PAYE as per the EMP201 to employment costs expense in the IT14.
- Profit/loss as disclosed in the financial statements to taxable income as calculated in the IT14.
- Total output VAT as declared in the VAT201 returns during the year to total turnover in the IT14.
- Total input VAT as declared in the VAT201 returns during the year to total cost of sales in the IT14.
In essence, it is meant to reconcile companies’ and CC’s accounting reporting to their tax reporting. An important fact to remember is that SARS does not have a materiality factor. SARS can request a detailed explanation for a reconciliation difference of R100.00 if they so wish.
Things that can go wrong and the results when it does:
- The IT14SD is not completed and submitted within the required 21 days.
SARS will issue a revised assessment, potentially disallowing all expenditure. - EMP201 information is less than employment cost expenses in the IT14.
An additional assessment will be raised by SARS if a detailed explanation is not provided. The expense claimed in the IT14 will be reduced to agree with the information on the EMP201. - The profit is less, or the loss more in the IT14 than the profit / loss in the financial statements
An additional assessment will be raised by SARS if a detailed explanation is not provided. The profit will be increased or the loss will be decreased in the IT14 to agree with the financial statements. - Output VAT less than turnover declared in the IT14.
A VAT additional assessment will be raised by SARS if a detailed explanation is not provided. - Turnover declared in the IT14 less than output VAT.
An Income Tax additional assessment will be raised by SARS if a detailed explanation is not provided. - Input VAT less than cost of sales in the IT14.
An Income tax additional assessment will be raised by SARS reducing the cost of sales if a detailed explanation is not provided. - Cost of Sales in the IT14 is less than the Input VAT claimed in the VAT201.
A VAT additional assessment will be raised by SARS reducing input VAT if a detailed explanation is not provided.
In addition to the additional assessment raised SARS can, in terms of section 222 of the Tax Administration Act, raise an understatement penalty. The understatement penalty can be anything from 10% to 200%. This penalty is in addition to the tax payable due to the additional assessment.
The process to rectify the assessment requires going through the formal dispute resolution process which may cause further negative consequences such as interest being charged and delays in obtaining a tax clearance certificate.
The IT14SD is clearly a return that must not be taken lightly and must be completed with great care and submitted on time.
If you have any enquiries, please contact Adri Britz at abritz@bkaudit.co.za.dedi1019.jnb1.host-h.net