Harbour & Associates

Almost every day, I get a phone call from someone who wants to buy a VAT registered shelf company. It’s usually because they want to buy a going concern business (most commonly a commercial property) at zero rate from a VAT registered company. As I explained in my February article a shelf company cannot, by definition, be VAT registered, because a shelf company is one that has never traded. Taking any route to buy such a company is therefore very risky. There is, however, a solution: Register a new company. Sign the Offer to Purchase (OTP) in that company’s…

My simple answer is NO!! Why? Because if you need to ask that question, you are not ready for the obligations that come with companies. Here are some of them with approximate costs. Cost of company R600 Beneficial Ownership Return within 10 days of registration R2 000 Bookkeeping from R7 000 per year 3 tax returns a year R4 000 to R6 000 per year Beneficial Ownership and Annual returns to CIPC R4 500 per year Then you decide to shut the company down. Cost about R13 000 plus all the outstanding returns. Rather spend R460 on my book “16…

I often I get asked whether to “buy” a car on a Lease or buy on Instalment Sale and then whether the firm should own the vehicle or the Director. The answer to the first does depend on the answer to the second, so let’s tackle the second one first. (How confusing is that?!) If the object is to minimise the combined tax bill of the company and the director, then it is worth while doing the numbers. But the chances are that, if the vehicle is in the middle to upper bracket and the director does a fair amount of…

How do you feel about the new User Interface that Standard Bank are trying to shove down our throats? There’s an option to revert to the old UI, but next time you log in you’re stuck into the new one. I feel I’m getting shunted around and having to either enter my password or scan my QR code just to get in and then again to go to the old UI. Then, we have four business accounts and two personal accounts. Where are the personal accounts? Nowhere to be seen! And you want to pay a beneficiary? Sorry chum, there…

It just gets worse and worse. Trusts Here’s the latest stuff up, an email from the Master: The staff member concerned is the one tasked with submitting all our clients’ Beneficial Ownership returns. She has NO authority to disclose the contents of the return. The Master, however, is giving her that power. We have two Growth Trusts on our books and there are another two on the portal, and the email does not give the trust number. Companies Here’s the old news: When completing the submission you have to select “Company without Beneficial Owners” or “Company with Beneficial Owners”…

I get so many questions about “Trading As” that I again feel that I have to explain what is actually a very simple concept. Any company can “Trade as” as many different business names as it likes. There is NO control over this, no regulations and no registrations. Yes, you can do what you like, despite what the Consumer Protection Act tried to instigate*. Only two things you must bear in mind: Do not incorporate a wellknown brand, like “Woolworths” by trading as, for example, Woolworths Retailers. Their attorneys will demand that you withdraw the use of that name. Do…

So many people are confused by this. So, here it is in as simple terms as the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act of 2022 will allow. Beneficial Ownership of Companies Every company, whether active or dormant, is required to submit a BO return to CIPC. CIPC are insisting (incorrectly) that this be done annually, before the submission of the normal Annual Return. The beneficial owners of a company that is owned by natural persons are: The shareholders Anybody else who has control over the company. The beneficial owners of a company that is owned by…

I have been puzzled by the fact that we are still selling a lot of shelf companies. After all, it only takes a few days to register a new company, and the cost is R610, compared to R4 240 and upwards for a shelf company. As the sales are online, we don’t get to ask the question. I can only assume that they want an old company so that they appear to have been in business since its registration. What really does make sense is to buy one with an import or export licence if that’s what you need, as…

You’ve built your small business (one with assets valued at no more than R10m) and now you want to sell it, use the proceeds to add to your property portfolio and retire. What are the CGT implications? We have to go to the Eighth Schedule of the Income Tax Act para 57 2(c). Provided you are 55 years or older or that you are selling because of ill-health, infirmity, superannuation (why can’t they say retirement?) or death, the first R1,8m capital gain is ignored. Isn’t that lovely? The company cost you R100 (shares). It’s now worth R10m, so you’ll only…

According to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 2022, the Directors of every company are required to submit a return of the Beneficial Owners (usually the shareholders) of their company to CIPC. Then they only have to submit another if, and when, the beneficial ownership changes. At this stage, I am not convinced that CIPC will only impose this obligation once or will require a new Beneficial Ownership along with the submission of every annual return. We’ll have to wait and see whether or not they get it right. In the meantime, however, they have…

You are thinking of going into business. You haven’t really made up your mind but you figure you may as well register a company in the meantime. Bad decision! We register hundreds of companies, and it is truly sad to learn later just how many of them never even started trading. The usual message is “Hi Derek, you may remember that you registered a company for me back in 2018. It’s never traded, so I didn’t submit tax returns or any of that stuff. Now SARS has hit the company with Administrative Penalties totalling R35 500! I’m not sleeping at…

It may seem a bit crazy. Here are the numbers: New company registration fee incl VAT R610 Of that SARS gets VAT of R80. CIPC gets R50 to reserve the name. CIPC gets R125 to register the company. That leaves R355 for us. And for that we provide: Free bookkeeping for the first 6 full months. Normal cost excl. VAT R2 810 B-BBEE Affidavit/Certificate. Normal cost excl. VAT R790 Derek’s book “16 Steps to Business”. Normal cost excl. VAT R410 (R470 incl VAT) Unlimited Zoom meetings with Derek. Priceless! Total value R4 010 excl. VAT and excl. Derek’s time. Are…

People used to buy shelf companies for a number of reasons: They needed a company urgently and couldn’t wait while CIPC went through the tedious registration process. It now takes about a day to register a new company at CIPC. They wanted to back-date the sale of the company (for R100) to their trust followed by backdated donations to the company. It is now compulsory to submit a Beneficial Ownership Return to CIPC and also in the company’s Annual Tax Return to SARS. This discloses who the shareholders are, so the change of shareholding can no longer be backdated. They…

It is very important to manage any loan account that you have with your company, because this can save you paying unnecessary tax. Loans to a company by you These can arise from: Money you spent on behalf of the company before it was registered. This is something that is frequently neglected. Your assets, such as computers, printers etc. that the company now uses. You should sell them to the company and credit your loan account with the sale price. Money you lent to the company when it was short of cash. Your after tax salary, for which the company…

Let’s say that one company has two businesses. There are two shareholders and each runs one of those businesses. The reason they chose this structure is that although different, each business generates leads for the other, so there is good synergy. Is there any benefit in keeping two sets of books, one for each company? Not in my view. The reason is that there are bound to be shared costs and if you have separate books, then you have to split those costs. This is a trap that is quite common. The difficulty is that you have to decide on…

Evidently about mid 2022 SARS posted a letter onto it’s website advising anybody that was lucky enough to stumble on it that it had set up a new platform for import and export licenses. It advised traders that they must migrate to the new platform (they called it “onboarding”) Of course, nobody saw the letter. Now we just got bombarded by SARS with SMSs advising us that our (clients’) licenses are about to be suspended, because they did not onboard to RLA. Thank you SARS. Brilliant communication. It took us the usual forever to navigate our way through the process,…

I have yet to form a trust of which at least one of the trustees is also beneficiary, so the answer is an unequivocal “Yes”. “But hang on”, you say, “I snipped this from the CIPC website when I was trying (yes, I’ve also tried) to submit my trust’s Beneficial Ownership return” – So now CIPC is changing the law relating to trusts. Absolute nonsense! But said with such authority, one wonders who in their right mind at CIPC could come up with that one.

Sure, we only charge R475 to form a company, and R175 of that goes to CIPC in fees. Maybe that’s why so many people don’t think twice about registering a company. What they don’t consider is that if they do not use the company, then these are the costs – Two nil provisional tax returns each year at about R650 each Nil Annual Tax Return at about R700 Or R200 every month per return SARS Administrative Penalty for non-submission CIPC Annual return about R1 000 Once off declaration of beneficial owners about R1 000 And then the whammy – Cost…

My regular readers will have noticed that I’ve made a couple of mistakes lately. Firstly regarding trusts having to register for tax (a whopper), and secondly, by cutting and pasting a lease and missing out the important cancellation clause. This brings me to a fundamental in management that few people adopt. I make it quite clear to my staff that they are allowed to make mistakes. I’m not talking here about sloppy work, I’m talking about genuine mistakes arising from lack of knowledge or experience. If they do make a mistake, they know that they can come…

In my discussions about Trusts, I frequently have a go at attorneys who are self-confessed cut and paste experts. I point out that the more you cut and paste, the more likely you are to produce garbage. In fact, I dedicated a whole chapter on this in my book “16 Steps to Wealth”. But this week, I came across another cut and paste idiot. Me!! When we agreed to lease our residence in Pezula, Knysna, it was from the owners, who would move out so that we could move in. I offered to draw up the lease and they agreed.

General Business

How do I zero rate a going concern when I don’t have a VAT registered company?

Should I register a company?

Should I buy or lease my business car?

Trouble at Standard Bank

Beneficial Ownership returns. The greatest stuff up we’ve ever dealt with.

When can a company “Trade As”?

Beneficial Ownership Explained

Why buy a shelf company?

CGT allowance on sale of small business on retirement

How often must I submit a Beneficial Ownership return to CIPC?

Should I form a company?

How can we sell a company registration for R610 including VAT?

Why shelf companies are becoming less relevant.

Loans to and from a company

Can I run separate books for two businesses in the same company?

All Import Export licenses suspended

Can a trustee also be a beneficiary?

The cost of closing a company

You’re allowed to make mistakes

Derek Springett – Cut and Paste idiot!

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