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You can run but you can’t hide

Updated: Oct 21, 2021

One of our South African clients recently received a query from SARS. SARS were requesting the client to provide answers to the cash that had flowed into his accounts for the year under query.

They then proceeded to state the total that had moved through each of the client’s accounts and asked for a detailed analysis of these amounts and where each item had come from.

As it turned out, once we had completed the analysis, it showed that SARS “high level” numbers were EXACTLY correct. The amounts they specified in their query EXACTLY matched the totals provided by out analyses.

Why do I tell you this story? Well, to show you that SARS has access to a LOT more very precise information than they used to. My guess is that SARS had the amounts of every transfer into our client’s accounts long before they asked the questions of our client

The moral of that story is it’s best not to try to hide stuff from SARS any more. The exercise of their very strong powers, their access to information and very powerful data analysis tools and their move to interrogating that data through some sophisticated AI software means it is NOT WORTH THE RISK of trying to hide from them. Add to that their extreme hunger to meet some very large government bills and it is more than evident that we all have to up our game with SARS.

Not only do they have access to all your South African banking information (shown from my little, but very true, story above) but they also have access to your international banking information. The imposition of CRS (Common Reporting Standards) in the past few years has opened up all the hidden and undisclosed bank accounts people have around the world.

CRS facilitates automatic information sharing about foreign bank accounts between more than 100 member countries. In essence it forces a member country’s bank to share their data into a pool of information fed by every other country in the group.

The UK is also a member of the CRS system and HMRC have the same powers to access, analyse and interrogate all that information. In addition, the Finance Bill 2020/21 adds a new power to HMRC’s arsenal. They will now be able to issue a “Financial Information Notice” to any bank or other financial institution to force them to provide documents and/or other information about any taxpayer HMRC chooses.

Ostensibly this is to help HMRC comply with the terms of CRS but they also have a great big Covid-19 hole to fill so you can be sure they will be utilising every piece of data they can gather to try to discover their own little gold mines that they can go to excavate.

SO – if you get a nice little letter from SARS and/or HMRC best you get a qualified and experienced tax advisor on your team. The queries might simply be an information mismatch that needs to be fixed or they might be more insidious! How you answer, the words you use, are always important with revenue authorities so, if you get one of those letters, get all the warning bells ringing and proceed with extreme caution.

Remember, you can run but you can’t hide!!

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