Tax Practitioners: Do You Know That You Need A Signed Mandate? - The mandate files can be downloaded from the link below.
In my last tax webinar, 60% of the respondents in a poll advised that there was no signed mandate or engagement between their Tax Practice and their taxpayer clients!
Tax Practitioners (TP’s) need to know that there is in fact no longer a choice in this as a properly worded mandate is absolutely essential and a condition of using the SARS e-Filing website, but the majority of TP’s have not even read the terms and conditions. It’s also a question of the TP limiting their risk exposure protecting them not only from SARS, but claims from their clients.
Having a signed mandate is a condition of making use of the e-filing system, either the website or through the software of an independent service provider. The purpose of having a signed mandate is to pass on the risk of tax return production from the TP to the taxpayer.
The SARS e-filing terms and conditions says in the 2nd paragraph: -
“THE RULES AS WELL AS THE TERMS AND CONDITIONS HEREUNDER ARE BINDING AND ENFORCEABLE AGAINST ALL PERSONS THAT ACCESS THE SARS WEBSITE OR ANY PART THEREOF.
IF YOU DO NOT AGREE TO THE RULES AND THESE TERMS AND CONDITIONS, YOU MUST LEAVE THE THIS WEBSITE NOW AS FURTHER USE SHALL AUTOMATICALLY BIND YOU.”
So, if you make use of the SARS e-filing website or a back-office system that uses the SARS e-filing website the TP is bound by the terms and conditions even if they have not read them.
One of the conditions of the SARS e-filing terms and conditions - 5.4 says:
“If the e-Filer is a registered Tax Practitioner or a person referred to in section 240(2)(d) of the Act, the e-Filer must obtain a written mandate from the taxpayer, which mandate must be provided to SARS and at a minimum –
What is meant by “must be provided to SARS”? Does this mean that the TP must submit (provided to) to SARS a mandate to cover all the services? This wording is confusing, because if this is the case then SARS should provide a facility for this, but they have not. I think what SARS may be trying to say is that the TP should have a signed mandate in possession which passes the risk of the return submissions back to the taxpayer when the TP files.
It appears that this term also applies to a person mentioned in S240 (2)(d) of the TAA.
S 240 (2)(d) Every natural person who provides the advice or completes or assists in completing a document solely--
to or in respect of the employer by whom that person is employed on a full-time basis or to or in respect of that employer and connected persons in relation to that employer; or
under the direct supervision of a person who is registered as a tax practitioner in terms of subsection (1).
The e-Filer referred to in clause 5.4 above who is the TP or a staff member under his or her control, undertakes to carry out the terms of 5.4 as mentioned above–
Now to add to the risk profile of a TP we have a change in tax law – S 234 of the Tax Administration Act. Non-compliance in regard to negligent procedures could be a criminal offence for the taxpayer. E.g., failure to advise SARS of a change in address or a clerical error on a return could result in a criminal record. Even where there is no wilful intent (which is required to prove a criminal act) a taxpayer could land up with a criminal record as now SARS does not have to prove wilful intent, the negligent act allows prosecution. Clearly the constitutionality of this has to be tested.
TP’s need to think about this potential change in law and how it will affect the risk profile of their practice. Owing to the complications in tax law there are many issues that arise in tax return production where there is no wilful intent as the complexity of the tax law is beyond most taxpayers. So, imagine being a TP and your client gets arrested or is charged for a tax error which was your fault and you don’t have a signed mandate or engagement letter. The mandate is to protect you and is a method of passing the risk of providing tax services back to your taxpayer client and of course is mandatory in terms of the e-Filing Terms and conditions.
What must the mandate contain? For brevity the bullet points listed below are a must in a mandate but obviously there could be lot more: -
Please be advised that South African Revenue Services (SARS) has now forced us to make use of their E-filing Services and we require your mandate for MY FIRM to register as an E-filer on your behalf. Once this is done the following additional terms and conditions in regard to E-filing shall apply:
We have designed a mandate template, which is used as an educational document and explains every aspect that the TP does for their taxpayer clients as clients don’t actually know what is involved in the complications of tax and do not understand when things go wrong or SARS wants a verification or an audit and what penalties should be paid. All this should be set up in the mandate letter so that there is some understanding by the taxpayer which will protect the TP against claims.
A mandate can be set up to last for a couple years, perhaps up to three. Where there are changes in laws that affect the mandate it should be updated as soon as possible.
TP’s now face enormous risk and without a signed mandate they should not be filing any return and will have difficulty of proving that they have passed the risk of tax return production back to the client.