It is February, and the first month of the year is behind us. Perhaps you are feeling as though the year is already running away with or even from you. If so, this article is just for you. I will explain what you will need to do to ensure that your financial year-end runs smoothly.
Important dates to keep in mind (end February):
- 2018/02 Provisional tax payment – 28 February 2018.
- Last day to submit the 2017 income tax return for companies and CCs – 28 February 2018.
- Last day to submit IRP5 reconciliations – 31 May 2018.
- Last day to finalise financial statements – 31 August 2018.
- 2019/01 Provisional tax payment – 31 August 2018.
- 2018/03 Provisional tax payment (optional) – 28 September 2018.
Preparing for financial year end
My first bit of advice would be to take an afternoon off to go through the records for the year that is ending shortly and to prepare for the questions your accountant is going to ask when the financial statements are being compiled.
Think about transactions such as those stated in this article, make a list of them and send it to your accountant in advance. It will save both of you a lot of time, as you will not necessarily remember everything or have time to answer when the questions start coming.
Important: If the answer is yes to any of the questions below, you need to obtain supporting documents and send them to your accountant as well.
What are supporting documents?
Supporting documents are any document from a third party, such as a car dealer, that provides written proof that a transaction took place. Examples are tax invoices, facility letters, receipts, contracts, etc.
- Did you purchase any new property, plant or equipment during the year?
- Did you trade/sell any new property, plant or equipment during the year?
- Did you buy any livestock during the year?
- Did you make a note to count your livestock at year-end to determine how many animals you own?
- Did you sell any livestock during the year?
- Did you keep records of the natural accumulation/mortalities during the year?
- Did you make any new investments during the year?
- Did you make any withdrawals from your investments during the year?
Cash and bank accounts:
- Did you open any new bank accounts during the year of which your accountant is not yet aware?
- Did you register all petty cash income and expenses properly on a petty cash schedule?
Debtors and loans:
- Does anyone owe you money? If so, you need to keep record of the interest you have charged together with any payments received, and more loans.
- Did you sign surety for any new loans to financial institutions during the year?
- Did you enter into new loans with related parties and/or financial institutions?
- Are there any amounts still owed by you to other parties for the purchase of items that are payable within the next twelve months?
- Have all submissions to the Department of Labour (UI-19 and ROE) and the South African Revenue Service (EMP201) been submitted and updated?
- Were there any new appointments/dismissals/resignations during the year?
- Did you record how much PAYE/UIF/SDL has been paid in respect of each employee?
Once you have worked through all of the above – in time the list can become longer or shorter as your business changes – you will be able to explain the bigger events to your accountant with more clarity. I always advise that you write down the points, as you can then hand those documents to your accountant, thus reducing the need for them to contact you.
Set yourself the goal of completing the above every month to save time in future.
Finalising the tax
In terms of the Companies Act, 2008 (Act 71 of 2008) as amended, the directors of a company or CC are obliged to finalise the financial statements within six months after the end of the financial year.
When the financial statements are compiled, a good accountant will always determine which tax allowances you qualify for, and will then discuss it with you so that the necessary preparations can be made for the future.
By using the abovementioned questionnaire, your accountant can determine whether your business qualifies for any deductions. The deductions you may qualify for, were discussed in a previous article in the October 2017 edition of Stockfarm. Refer to it again if you want to refresh your memory.
As soon as the financial statements for the year have been finalised, your tax practitioner can take the profit for the year as the basis and make all the necessary tax adjustments, after which your taxable income for the year will be determined. By applying applicable tax rates to your business, the tax liability for the year will be determined, after which the provisional tax you have already paid, will be deducted (refer to the September edition of Stockfarm).
The difference between the final tax for the year and that which you have already paid, must be settled by 28 September 2018 to avoid interest on late payment.
The purpose is to finalise the financial statements of your business in March or April each year, so that you will have enough time to do the necessary cash flow planning to have the money ready by September.
So, there is no excuse for your business’s financial statements not to be finalised by the end of April at the latest.
If you are using the services of an accountant, it is his/her duty to ensure that everything possible is done to inform you as soon as possible of what the final tax for the year will be. Please note, however, that the final responsibility still lies with you as the company director to ensure that the business complies with applicable laws.
What my accountant needs
To make it as easy as possible, I would suggest that you update your files with the following documents, per financial year:
- VAT201 calculations and returns.
- UI-19 calculations and returns.
- EMP201 calculations and returns.
- Bank statements.
- Invoices for assets purchased.
- Contracts concluded for the year.
- Investment statements of financial institutions.
- Tax certificates [IT3 (b), (c) and (s)].
If you take the time to complete your last year-end administrative tasks, it will be possible to make the best of the coming year, as there will be no strings constantly pulling you back.
Therefore, perform the last task for the year because this will allow you to look forward to the time we will take to focus on the growth of your company. The purpose is to prevent all the limitations that previously kept you from reaching success. – Frans van Eden
Frans van Eden is the managing director of Prioritise (Pty) Ltd, an accountant and
specialises in growing the turnover, profit and cash flow of businesses. For more
information, email him on firstname.lastname@example.org.