Expert Legal Advice for Company Directors
When Can SARS Hold a Director Personally Liable?
Personal liability is not automatic for all tax types, but the Tax Administration Act gives SARS powerful tools to recover specific debts from the individuals in charge.
The law states that a director (or former director) can be held personally liable for a company’s tax debt if they were responsible for the company’s duties when the non-compliance occurred. This applies specifically to taxes where the company acts as a collection agent for SARS, holding funds in trust. These are primarily:
- Value-Added Tax (VAT): VAT is collected from customers on behalf of SARS. If the company fails to pay it over, SARS can pursue the directors for that amount.
- Pay-As-You-Earn (PAYE): This includes employees’ tax, UIF, and Skills Development Levies deducted from salaries. These funds belong to the employees and SARS, and failure to pay them is treated with extreme severity.
- Personal Asset Seizure: SARS can obtain judgments against you personally, allowing them to attach and sell your private assets to settle the company’s debt.
- Frozen Bank Accounts: Your personal bank and investment accounts can be frozen via a third-party appointment.
- Damaged Credit Record: A judgment for company debt will severely impact your personal credit rating and ability to secure financing in the future.
- Lasting Reputational Damage: Being held personally liable for tax non-compliance can have a lasting negative impact on your professional reputation.
- Immediate Legal Representation: We immediately act as your legal representatives, ensuring all further communication from SARS is directed through our office. You no longer have to speak with them directly.
- Challenging the Liability Claim: We thoroughly investigate the case. Were you the responsible director at the time? Was there gross negligence involved? We explore every legal avenue to challenge the basis of the personal liability claim itself.
- Negotiating a Global Solution: Often, the most effective strategy is to resolve the company’s underlying tax debt. We negotiate a global solution, such as a Company Debt Compromise or Payment Plan, which in turn resolves the personal liability threat.
- Ring-Fencing Your Assets: Our primary goal is to create a clear legal separation between the company’s liability and your personal wealth, providing you with a strong and defensible position.
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