Special permission for individuals and trusts carrying on a trade
Individuals and trusts who carry on a trade may now apply for permission to submit financial accounts for a period that differs from the year of assessment ending on the last day of February.
Interpretation note no 19 (Issue 3), issued on 9 October 2013 regarding section 66(13A), states that an individual or trust may apply for permission to draw up financial accounts for an accounting period other than the last day of February.
The Commissioner may approve the application if he is satisfied that the taxpayer’s income (the whole or a portion) cannot be returned for any year of assessment, and that the purpose of the request is not to obtain a tax benefit. The application should be in writing and should include the reasons for the request.
Section 66(13A) therefore allows taxpayers to draw up financial accounts for their businesses for an accounting period other than the year of assessment, as agreed with the Commissioner. The income for the accounting period is deemed to be the income for the year of assessment that ends on the last day of February. There is no requirement to apportion any of the income for the year of assessment.
If the chosen accounting period falls within the period from March to September, the income for the accounting period will be taxed at the applicable rates and rebates as at the last day of February of that calendar year. For an accounting period between October and February, the income will be subject to the applicable rates and rebates as at the last day of February of the following year.
Although accounting periods may differ from the year of assessment, the last day of February will be the operative date for all other purposes of the Income Tax Act. This means that the applicable tax rates and rebates will be governed by the statutory year of assessment, which is the last day of February.
The Commissioner’s permission for submitting financial accounts for a period other than the year of assessment is limited to trade income. Other sources of income such as remuneration, interest and dividends do not qualify for this allowance.
Article written by Hanneke Mostert
For more information please contact Willie Smith or Hanneke Mostert of Tenk Loubser & Associates (Tygervalley) on 021 915 6666 / firstname.lastname@example.org