We all survived a rather bizarre weekend as we get used to what is becoming our new reality. As always we are confining our commentary to all things economic as we are being bombarded with news 24/7 on the state of the pandemic. Economically quite a bit seemed to transpire over the weekend so we will try and be as concise as possible whilst being comprehensive at the same time.


We have managed to get our hands on a draft proposal document which we expect to come into law in the next day or two. We don’t expect much to deviate from this document. From a Tax perspective the relief is basically split into 3 sections.


PAYE AS YOU EARN
For 4 months beginning 01 April 2020 (PAYE payable on 7 May 2020) Employers who:

  1. Have an Annual Turnover of less than R50 000 000 (Fifty Million Rand)
  2. Have all returns up to date with SARS
  3. Have no outstanding tax debt with SARS

Will be eligible for relief. We have confirmation that when a debt is under objection and we have obtained a debt suspension in terms of S 164 of the Income Tax, Act point 3 will be overlooked.

The relief is that 20% of the payment may be held back to be paid in 6 monthly instalments commencing 07 September 2020 with no interest or penalties. By way of a simple example, if your PAYE is R10 000 every month for 4 months, you will be able to hold back R2 000, and pay R8 000 over. Starting with the payment on 07 September 2020 you would need to add R1 333 (R8 000/6) for 6 months to square everything off.


It is imperative that the correct amount be filled in on the requisite form as if you understate your PAYE then interest and penalties will apply.


As the majority of business have unfortunately had to temporarily lay off a lot of their workforce we are unsure as to how much this will benefit anyone, aside from businesses still managing to trade. Let me not put a negative spin on it, in the year ahead we must save everything we can as counting pennies will ensure our economic survival.


If you have any doubts please contact our payroll guru Taryn on taryno@mrmfs.co.za for advice.

PROVISIONAL TAX PAYMENTS
This one gets a bit tricky so will try and keep it simple.


Under current law provisional taxpayers need to pay 50% of the tax on their estimated earnings at the end of August with a second payment of the same amount being paid at the end of February, this is for taxpayers with February year ends.


The proposed change is that instead of 50% at the end of August, 15% of the tax due needs to be paid with 65% of the tax due being paid by end February. The remaining 20% must be paid by way of a third top up payment by the end of September 2021. This will not attract interest or penalties.


Illustrated by way of an example, based on current law, if your company expects to earn R100 000 for the 2021 Tax year then R14 000 should be paid by the end of August 2020 and a second payment of R14 000 made at the end of February 2021.


Under the COVID revised system R4 200 would be paid by end August 2020, R18 200 paid by end February 2021 and the remaining R5 600 to be paid by 30 September 2021.


If all of that is as clear as mud to you, don’t worry, we will be adjusting the returns automatically for you. Your August payments will be 35% less than you were expecting.


Once again, whilst we take what we can get, it does not appear to help where it is needed. It is unlikely that very many businesses will be paying anything at all in August or for the rest of the year as none of us can expect much in the way of profits to materialise. The concession does not extend to your individual capacity unless you trade as a sole proprietor, and in this case various unsporting restrictions are applied. Instead of cluttering this text up any more than it already is, if you want this point amplified any further please contact Devasha on devashag@mrmfs.co.za .

ETI
The Draft interpretation has been released regarding the changes to the Employment Tax Incentive, this will further assist SME’s to retain employees during this critical period. The program has been expanded for the period 1 April 2020 to 31 July 2020, on the condition that the Employer was already registered with SARS on 1 March 2020 and that the current compliance requirements are met.

  • Increasing the maximum amount of ETI claimable during this four month period for employees eligible under the current ETI Act from R1 000 to R1 500 in the first qualifying twelve months and from R500 to R1 000 in the second twelve qualifying months.
  • Allowing a monthly ETI claim in the amount of R500 during this four month period for employees from the ages of:
    -18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of
    those employees for 24 months; and
    -30 to 65 who are not eligible for the ETI due to their age.
  • Accelerating the payment of employment tax incentive reimbursements from twice a year to monthly as a means of getting cash into the hands of tax compliant employers as soon as possible.

We certainly hope that the SARS payment system can accommodate all the new claims and that they are
actually able to release these payment monthly, if not it makes the entire scheme pointless as it’s cashflow that cripples the SME’s during this period. We suggest contacting your Payroll service provider to see that these changes are made in their software.


If we run your Payroll rest assured we have been in contact with our Software providers and they are already working on the changes. As this is a fairly specialist initiative please feel free to contact Shireen on
shireen@mrmfs.co.za if you have any queries.

BANKS
Our investigations into bank support show that the banks are really just giving lip service at this time.


Standard Bank were the first ones trying to get mileage out of COVID but it turns out that their relief is for
debt payments to people earning less than R7 500 per month. With due respect, if people earning less than R7 500 have been awarded any tangible debt, then it must be classified as irresponsible lending by the bank in the first place.


ABSA have made a big deal out of supporting businesses distressed by COVID, but have yet to release anything tangible aside from lip service.


Nedbank have told everyone to get hold of them if they have a problem paying. A client of MRM’s has tried this route with Nedbank and been given a list of things to supply as long as your arm, so once again, whether or not these promises are empty remain to be seen.


FNB have only released their approach around 11 this morning, so it’s hot off the press. If you have a decent credit rating with them they are prepared to give instalment relief, a preferential interest rate, no fees and individualised bridging facilities where needed. In text they look promising but reality may be far different.

We have even spent time reading what Banking SA have to say. That time is largely wasted as after reading pages and pages of waffle the only concrete thing from it was that Saswitch fees are being waived on Autobank transactions.


In short they are at sixes and sevens, but one hopes they will find cohesion as time passes. We will keep you up to date as more info becomes available. To allow you to sleep better, remember that they are prohibited from any heavy handed collection tactics until the Pandemic is averted. One would hope they make a virtue of necessity, but time will tell.


We are trying to keep our news brief to stop everyone having to page through reams of drivel. We have more to update, especially on economic policy etc. but will retain all that for future updates over the course of the week.


Keep safe, keep isolated and be positive.
Chris, Shireen and the MRM Team