Abstract
The South African Revenue Service (SARS) has identified third-party appointment as an important weapon in its tax-collection arsenal. In terms of section 179(1) of the Tax Administration Act 28 of 2011 (TAA), SARS is permitted to issue a third-party appointment notice in terms whereof a third party becomes liable for the taxpayer’s tax debt in instances where the third party holds (or will hold) money on behalf of or due to the taxpayer. Although the usefulness of the appointment of a third party from a collection perspective is apparent, it remains important to ensure that certain built-in measures are in place to ensure that SARS does not use this power in an overzealous manner and that taxpayers’ rights are respected.
 This case note reflects on the case of Sip Project Managers (Pty) Ltd v C: SARS (Case number: 11521/2020 Gauteng Division, Pretoria (30 April 2020)), where section 179(5) of the TAA was considered. The SIP Project Managers case is important because it provides some perspective on this relatively new insertion in the TAA. In the first part of this case note, the facts of the case and the judgment are provided. In the next part, the judgment is analysed by considering the consequences of SARS’s failure to adhere to peremptory wording and by contemplating whether the tax debt must be “due and payable” before a notice in terms of section 179(5) of the TAA can be delivered. Thereafter, some conclusions are drawn.
Highlights
The South African Revenue Service (SARS) has identified third-party appointment as an important weapon in its tax-collection arsenal (SARS Tough New Penalties for Outstanding Income Tax Returns (2009) 4)
The usefulness of the appointment of a third party from a collection perspective is apparent, it remains important to ensure that certain built-in measures are in place to ensure that SARS does not use this power in an overzealous manner and that taxpayers’ rights are respected
I suggest that the wording of section 179(5) be amended to create certainty. This can be done by explicitly indicating that the tax debt must be due and payable when the section 179(5) notice is delivered, similar to the wording used in section 179(1) of the Tax Administration Act of 2011 (TAA), or by stating that the taxpayer must be in default
Summary
The South African Revenue Service (SARS) has identified third-party appointment as an important weapon in its tax-collection arsenal (SARS Tough New Penalties for Outstanding Income Tax Returns (2009) 4). “SARS may only issue the notice referred to in subsection (1) after delivery to the tax debtor of a final demand for payment which must be delivered at the latest 10 business days before the issue of the notice, which demand must set out the recovery steps that SARS may take if the tax debt is not paid and the available debt relief mechanisms under this Act, including, in respect of recovery steps that may be taken under this section‒ (a) if the tax debtor is a natural person, that the tax debtor may within five business days of receiving the demand apply to SARS for a reduction of the amount to be paid to SARS under subsection (1), based on the basic living expenses of the tax debtor and his or her dependants; and (b) if the tax debtor is not a natural person, that the tax debtor may within five business days of receiving the demand apply to SARS for a reduction of the amount to be paid to SARS under subsection (1), based on serious financial hardship.” This case note reflects on the case of Sip Project Managers (Pty) Ltd v C: SARS (Case number: 11521/2020 Gauteng Division, Pretoria (30 April 2020)), where section 179(5) of the TAA was considered.
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