In a judgment handed down by the High Court in December 2024[1], the court had to decide an application brought by a taxpayer to effectively force SARS pay out a refund which had not been assessed.
It involved an ETI credit which the taxpayer failed to timeously claim in the first version of its EMP501. The EMP501 was then corrected by the taxpayer to reflect the ETI credits and filed again. The second version of the EMP501 was, however, filed “outside the prescribed time period” for claiming previously unclaimed ETI credits and SARS said that failure to claim in the first EMP501, which was filed by the cut-off period, resulted in the unclaimed ETI credits being forfeited.
I will reserve my comments on the merits of that argument for SARS (mainly because I am not keen on giving away advice for free) but I am willing to comment on the procedural issue which the taxpayer, in my humble view, created for themselves under the Tax Administration Act (TAA) by approaching the issue in the way they did.
That issue being: the issue of the jurisdiction of the High Court to entertain tax related matters.
SARS argued that the taxpayer ought to have objected which brings section 105 of the TAA into play and when read with the Rappa et al judgments (I know we are waiting for the CC judgment but the judgment in questions was handed down before we have the CC’s views so relax) the taxpayer is in the wrong court.
The taxpayer effectively argued that the very submission of the corrected return is a reduced assessment and so it is not arguing in relation to an assessment, it is simply asking the court to tell SARS to pay out that refund in respect of which there is no dispute (they said). That this is so (the argument goes) follows from the fact that the submission by the taxpayer of the corrected return in the absence of an additional assessment raised by SARS under section 92 of the Tax Administration Act (TAA), makes the corrected return a reduced assessment.
You see, in this way (or at least, so the argument goes) section 105 is not engaged as there is no dispute about the assessment per se.
At first, many may seem to think that this is a very cunning way of avoiding the tax court. But, respectfully, it falls hopelessly short of being correct, let alone cunning.
Indeed, the court struck the application with costs and told the taxpayer to go try their luck in the tax court. Really, the basis for the court’s decision comes down to the fact that it is only SARS that can issue a reduced assessment under section 93 of the TAA and there is no such thing as a reduced self-assessment. Some might pause here and say: “but wait … I am sure I have heard or read something like that somewhere before”.
Indeed, I said exactly that in my book (already in the first version in 2020), The Practical Guide To Handling Tax Disputes. If there is something cunning about this whole issue, it’s how close the court came to quoting me directly.
High Court in the 2024 judgment: “Only SARS has the power to issue … a reduced assessment”[2]
Nico, already in 2020: “It is worth noting here that only SARS can make a reduced assessment …. there is no such thing a reduced self-assessment by a taxpayer”[3]
It seems the courts are starting to agree with me on many tax dispute related topics (see for example an article I wrote about a Tax Court judgment on the issue of prescription here and another about the very memorable “application to amend an objection” thing here (my views confirmed when the case reached the SCA quite some time after I published that).
As to the reference in the title of this article to “a missed opportunity”: There is indeed a way, in my humble view, where the procedural issue in this case could have been avoided, but, like I said earlier, I don’t like to give away advice for free. Suffice it to say that there is a clue[4] in the following extract from the judgment:
“By submitting “replacement” returns, the applicant, in effect, objected to its own self-assessment, which objection was not upheld by SARS.”[5]
[1] Jaymat Enviro Solutions CC v Commissioner for the South African Revenue Service (7559/2024) [2024] ZAWCHC 423 (13 December 2024). Fanie, I put the punctuation mark after the footnote on purpose just to annoy you a little :-).
[2] At paragraph 22.
[3] Practical Guide to Handling Tax Disputes, at paragraph 3.3.3.
[4] I am not saying I agree with what the court says here (because I don’t). Only that it contains a clue.
[5] At paragraph 35.
