Taxpayers raising the procedural defence of prescription to a notification from SARS demanding tax payment of an amount of some historic tax year must distinguish between a prescribed assessment and a historic tax debt, since different prescription periods apply. For example, it has become recent practice for SARS to demand payment from an employer for PAYE, going back to 2005.
Prescription and assessments
Under s 99 of the Tax Administration Act, SARS may not raise an assessment three years after the date of assessment of an original assessment by SARS. With self-assessments, such as for PAYE, the period is five years after the date of assessment of an original assessment. These general restrictions are subject to the absence of fraud, misrepresentation or nondisclosure of material facts. Prescription and tax debt Under s 171, proceedings for the recovery of a tax debt may not be initiated by SARS after the expiry of fifteen years from the date of assessment of tax.
Evaluation of SARS claim
Upon receipt of a demand for payment by SARS, it is best to draw, via eFiling, a statement of account pertaining to the nature of the tax allegedly due, for example, PAYE. A taxpayer can then evaluate whether such a SARS demand is for an historic tax debt or is an additional assessment, since the answer will govern whether the prescription period is fifteen years or five