zombie, Author at Harbour & Associates

I have already discussed whether a trader should trade through a company, but what about a service provider? A service provider is a business that supplies services rather than goods. Should it be a company? If the services are provided mainly (80% or more) to one client, then the company may well be classified as a Personal Services Company, in which case the client must deduct PAYE from all invoice payments. This often discourages the client from doing business with you. However, the same would be true if you sold your services…

I was recently asked this rather interesting question and my response was “Yes, most definitely”. Why? My reply stands on two pillars – Firstly, the capital which would be an asset of some kind, such as fixed property or shares in a company, has not been distributed, it is either still held by the trust or has been disposed of by the trust. Either way, that’s a separate transaction from the Capital Gain. The separation of the capital gain has not changed the asset. It is still a piece of fixed property or it is still the same shares. Secondly,…

There are direct costs and there are opportunity costs. Let’s look at the direct costs first. Capital Gains Tax Because you are a connected person in relation to the trust, the sale (you would not want to make it a donation) will be deemed to be at market value and CGT will apply at up to 18% of the increase in value over the base cost (purchase price plus cost of improvements) as if you had sold the house to a third party. But don’t despair! Because this is your primary residence, you are allowed to make a capital gain…

If you are a small supplier of goods, you may be wondering whether would be better to trade through a company. The answer is usually “Yes”. The first question I ask is “Are you providing a service or supplying goods?” If you are supplying goods, then the answer is usually yes, rather trade through a company. Why? 1) Your customers will probably respect a company more than a sole trader. 2) Companies are taxed at 28%, individuals at from zero to 45%. You can balance your salary in such a way that the total tax is minimised. 3) The company…

I came across a mind blowing arithmetic pyramid and couldn’t resist the challenge of figuring out how it worked – Here’s the magic pyramid that held me in awe (I can’t give credits, because I don’t know who discovered it) So why does it work? It turns out to rely on that magic little number 9, so let’s reverse engineer it – I found it easier to start with the big number so that I could figure out the logic. Notice how taking one of the starting numbers away shifts all of the numbers…

I am often asked whether it is wise to put one’s house into a trust. There are two answers – Yes and No. If you formed the trust mainly to protect assets from your creditors, then you may consider it worthwhile protecting your house in the same way. Be aware that if the house is bonded, then you will have to re-negotiate the bond and that particular creditor (the mortgaging bank) will be on the trust’s side of the firewall, so the house will only be protected from your creditors, not those of the trust itself. Also, if the house…

Your trading company is high risk and makes surplus money. Your investment company is low risk and wants money to invest. How should they sit in a trust structure? Not so long ago, I would have suggested that you use a holding company to create the link between the other two companies, whilst protecting the investment company from the trading company risk. The trading company declares its excess money as dividends to the holding company and no Dividends Withholdings Tax is levied because the shareholder is a company and not an individual or trust. The holding company then…

It now only takes about a week or so to form a new company, so why buy one off the shelf? The main reason for buying a shelf company is its age. We have them aged as old as 2010 and never having traded. You may want an old registration number to give the impression that you’ve been in the business a long time, or you may want to back-date some kind of transaction, such as the company’s ownership by a trust and that clearly can’t happen before the company and trust were both registered. That’s…

There are two potential benefits – asset protection and estate planning I’ve dealt with the first in another article, so what about estate planning? Two taxes kick in on your death (or that of your spouse dying second if you have bequeathed everything to each other). Estate Duty at 20% or 25% is taxed on you net assets at the time of death. There’s an allowance of R3,5m each and that is often enough to leave the house untaxed. You are deemed to have sold your assets to your deceased estate at the moment of death…

We moved to apartment living in Rosebank in September and have, for the first time become aware of the beginnings of the devastation of the urban forest. On the upside, however, we also enjoy almost daily sightings of rose-ringed parakeets. I used to be a very keen birder, but nowadays, I simply enjoy hearing and seeing them and no longer go out of my way to tick new ones. So it’s years since I added another tick to the 700+ list that I had accumulated over time. Imagine my surprise then, when…

We form hundreds of companies for clients with the result that, because meetings with me are free, I get to talk to hundreds of entrepreneurs. It is quite clear that many of them do not understand the distinction between a company’s promoters, shareholders, directors and employees, so here’s a guide. Now, I’m not going to get technical, so if you’re studying for an exam, go to the Companies Act for the full story. I just want to offer a simple explanation that everyone can understand. The Promoter(s) form a new company at CIPC by choosing a name…

It is almost certainly more tax effective to use your own car for business and submit a travel claim against a travel allowance rather than drive a company owned car. Because your travel claim is limited to your travel allowance, you will need to make sure that the allowance exceeds your estimated travel claim. If you keep a record of actual expenses paid by yourself, you may claim those expenses, but most of us claim the Deemed Travel Expenses which you will find here. You will need to select the year that you are interested in. Employers…

We have got to the point where we are reluctant to tell our clients about the SARS penalties because SARS themselves are being totally inconsistent. This is where we are at today 7 April 2019… On 29 November last year, SARS sent out a notice to the effect that they planned to implement administrative penalties against all companies with outstanding tax returns, including dormant companies. In early March 2019, we received about 400 emails and SMSs from SARS directed at clients stating that they had until March 29…

Today 4 April 2019, the South African Revenue Service (SARS), started imposing recurring monthly penalties (minimum R250 per return, maximum R13 000). This includes dormant companies! We are in posession of hundreds of identical emails and SMSs which simply state the following… Dear Taxpayer, A recurring penalty has been imposed to you. For more information please contact SARS Contact Centre on 0800 00 7277. Regards SARS We have no way of knowing to which client any of them refer as they do not mention the name or tax number. We have notified SAICA (the South African Institute…

Johannesburg has the world’s largest urban forest (the other claimant in Rio is outside the residential part of the city). But our forest is dying! Helen and I live in Rosebank in the heart of the so called “Parks” – Parkview, Parkhurst, Parktown, and we are watching the trees around us die. Sure, many of them fall to property developers – there seems to be an insatiable demand for residential apartments, so that Rosebank central (which is largely devoid of trees) is creeping outwards, but that’s not the problem that we see as we drive through our leafy neighbourhood. Next…

So, SARS finally did it. On November 29 2018, they sent out a notice that they would start implementing administrative penalties against all companies (including dormant ones) which had outstanding tax returns. In March 2019, they sent emails and SMSs to those companies (we received over 400 on behalf of clients) advising that all outstanding returns had to be submitted by 29 March to avoid penalties, so it seems like March 30 is the BIG DAY! The penalties are likely to be at the lower end of the R250 to R16 000 range that they announced, but these penalties will…

Most contracts state that in the event of a dispute, it must be referred to arbitration, usually by an advocate. This can be very expensive. A far better alternative is mediation. Here’s how it works – The two processes are very different. The easiest to grasp is arbitration as it is clearly defined by the Arbitration Act. Anyone can be an arbitrator as long as all parties to the dispute agree upon whom it should be. The arbitrator determines the procedure and his or her job is to hear evidence from all parties, consider the facts and the law and…

Our CRM system recently sent reminders to all of our trust clients to donate R100 000 to their trust owned company before the 28th of February. Here’s why – Every natural person is allowed to donate a total of R100 000 each tax year free of Donations Tax (which otherwise is 20%). If you (and perhaps your spouse) donate R100 000 on loan account for the next 5 years, you will then owe the company R500 000 and have shifted R500 000 out of your future deceased estate. Say the company then wants to raise a bond to buy an…

I often get asked what happens to the assets of a trust in the event of a divorce, especially if the spouses are both trustees. The first thing to fully understand is that the assets are owned by the trust (or its company) and not one of the spouses getting divorced. The other spouse can be thought of as a potential creditor trying to break through the firewall protecting the trust assets. His or her attorneys will, (because this is what they learned at University and is about all they know about trusts), try to prove that the trust is…

The Consumer Protection Act requires that all contracts with consumers be written in plain language, but this should apply to all legal documents. The first problem is that attorneys spent years at university learning all sorts of Latin expressions, known as “legal Latin”. having learned it, they naturally want to use it and, hopefully, impress their clients with their legal nouse. Wikipedia lists about 400 of them under List of Latin legal terms. To give you a few common examples – ante = before bona fide = in good faith contra = against de facto = true in…

Author: zombie

Should I provide my services through a shelf company?

Can a capital gain be distributed to income beneficiaries of a trust?

What does it cost to put my house in a trust?

Should I trade through a shelf company?

Cracking the magic pyramid

If I put my house in a trust, is it protected from creditors?

How to structure your trading and investment companies within your trust

Should I buy a shelf company or register a new company?

Is there a benefit if I put my house in a trust?

Rose-ringed parakeets in Rosebank

Promoters, shareholders, directors and employees

Should I drive a company car?

What is going on regarding the SARS administrative penalties?

SARS imposes recurring penalties on all non-compliant companies

World’s largest urban forest is dying

SARS hits all companies with administrative penalties

Mediation as a means of settling disputes

Why you should donate R100K to your trust owned company

Trusts and divorce

Keeping contracts simple