4TH QUARTER 2007 VOLUME 9

HOW ETHICAL ARE YOU REALLY?

Antonie van der Hoek recently had the opportunity to attend an Ethics For
Accountants workshop. This workshop, facilitated by Dr Larry Kaufmann
from the Unilever Ethics Centre at University of Kwazulu Natal, proved a
fascinating experience and a topic that invites very varied opinion.

I have to admit, that when I booked onto the course I
was mainly doing it for the CPD points. To my surprise I
found the workshop most stimulating and Dr Kaufmann
an excellent facilitator who encouraged attendee
participation and debate.
To warm up we had to complete an exercise whereby
we had to rate eleven statements relating to ethics. We
had to rate each statement on a scale of 1 to 6, 1 being
total agreement and 6 being total disagreement with the
statement.
I diligently spent 5 minutes completing the exercise
and then compared my ratings to the person sitting
next to me, the financial director of an international
company. In our profession dealing with audit risk in
terms of International Auditing Standards, ethics has
a high priority. Consequently my ratings were all 1’s or
2’s indicating a high awareness of ethics. I was shocked
that the financial director sitting next to me had mostly
5’s or 6’s, indicating a very low awareness of ethics in
his business environment.
We discussed this result in depth and one of the possible
conclusions we came to was that the audit profession
with all its rules, regulations and standards had forced
an ethical awareness on practitioners, whereas generally
in business the main objective is profit or gain with very
little regulated requirement for the way in which this is
achieved.
I somehow doubt that regulation is the only way to
make people behave ethically, but the thought that
some people or organizations might only behave
ethically to avoid the consequences of laws and
regulations is scary.
Ethics is the way we determine values. It is the ability
to discern right from wrong, good from bad, and to
choose freely and in an informed way to live by what
is discerned as right and good. If we need laws and
regulations to do this for us then society is really in a
bad state.
Continued inside

WHAT’S IN
NO CGT FOR CERTAIN DISPOSALS
A legally sanctioned way

TEST YOUR ETHICS

How do you fare?

TAX-FRIENDLY CHANGES
To brighten your day

DIVORCE GETS DIRTY

Watch your Will

CASH IS KING
The oldest rule in the book

ED’S DESK
By now, the end of year parties are
in full swing. Holidays are in view
and I bet the bags are packed.
But wait, some of us are still
grafting away and making sure that
the balance sheet balances, your
VAT is what it should be and tax
deadlines are met.
Although we do shut our doors
over the festive season (which for
Cameron & Prentice will be from
21 December until 2 January)
it’s work as usual at Cameron &
Prentice. It’s only a few months
away from end of financial year for
many, which pretty much means our
days are busy.
Because it is the end of the year,
we thought we’d create a reason
to celebrate and feature a few
positives that are coming your
way. Dave Warneke highlights tax-
friendly changes and an interesting
way of reducing CGT. Peter Prentice
examines what we believe it means
to be an accounting officer.
Over the years, we have come to
realise that although we are an
audit firm, we also add enormous
value to clients in terms of providing
business advice. We have seen how
important it is for the success of a
business to understand and practise
basic business principles. That’s why
we have established a new feature
called A Word Of Advice that focuses
on this.
We would like to wish you all a
fantastic festive season. We trust
that you will have a prosperous
2008!
Ed
IN BRIEF
Tax on share transfers
With effect from 1 July 2008, the current laws relating to the payment
of stamp duties on the transfer of shares will be replaced by the Secu-
rities Transfer Tax Act. Transfers of listed shares, unlisted shares and
members’ interests in close corporations will be subject to a securities
transfer tax at the rate of 0.25% of the market value of the shares
or members interests transferred. In respect of unlisted shares and
members interests, the tax will have to be paid within two months of
transfer. Late payments of the tax will be subject to interest, at the
SARS official rate, and a ten percent late payment penalty.
Annual returns for CC’s
CIPRO announced earlier this year that, although 1 April 2007 was the
commencement date for the submission of Annual Returns by CC’s,
they anticipated that annual returns for CC’s would only have to be
lodged with effect from the latter part of 2007. It now appears that
CIPRO will not be enforcing the submission of annual returns for CC’s
in 2007.
Secondary Tax on Companies Rate
As mentioned in an earlier issue of our newsletter, the STC rate was
reduced from 12.5% to 10% with effect from 1 October 2007
UIF benefits increased
With effect from 1 October 2007 unemployment insurance fund ben-
efits have been increased by 7%. The maximum that may be claimed
from the UIF has been increased from R11 662
Continued from cover
Fortunately, I believe in the good of people. Some may need persuasion
to behave and live in an acceptable way, however most of us have it in
us to recognize right from wrong.
Take the ethical test.
1 You consciously think about ethics and ethical 1 23456
consequences when performing your job
2 You feel equipped to deal with ethical issues 1 23456
3 There is a general awareness of ethics in your 1 23456
profession or industry
4 The CEO of the firm is committed to ethics 1 23456
5 The Board is committed to ethics 1 23456
6 Members are committed to ethics 1 23456
7 Ethical role models are present in the 1 23456
profession/industry
8 People actually talk about ethics in the 1 23456
profession/industry
9 Ethical behaviour is encouraged 1 23456
10 The atmosphere in the firm makes it easy to 1 23456
make ethical decisions
(Acknowledgement: Deon Rossouw, Business Ethics, pp 210 – 211).
WHAT DO YOU EXPECT FROM
YOUR ACCOUNTING OFFICER?
While Section 62 of the Close Corporations Act, 1984 (No 69 of 1984)
governs the duties of an accounting officer, Peter Prentice questions
whether or not the minimum duties required of an accounting officer can
ever live up to the member’s expectations.

At Cameron & Prentice we feel that there is a significant service gap that exists between simply following the
letter of the law (and doing the bare minimum), or going the extra mile to ensure that the financial statements
reasonably and accurately present the financial position of a client’s close corporation.

According to the Act the duties of an accounting officer are as follows:

1 The accounting officer of a corporation shall, not 3 If an accounting officer of a corporation-

later than three months after completion of the
annual financial statements-
a) determine whether the annual financial
statements are in agreement with the
accounting records of the corporation;
b) review the appropriateness of the accounting
policies represented to the accounting officer
as having been applied in the preparation of
the annual financial statements;
c) and report in respect of paragraphs (a) and
(b) to the corporation.
2 If during the performance of his duties an
accounting officer becomes aware of any
contravention of a provision of the Act, he shall
describe the nature of such contravention in his
report.
a) at any time knows, or has reason to believe,
that the corporation is not carrying on
business or is not in operation and has no
intention of resuming operations in the
foreseeable future; or
b) during the performance of his duties finds-
i) that any change, during a relevant
financial year, in respect of any particulars
mentioned in the relevant founding
statement has not been registered;
ii) that the annual financial statements
indicate that as at the end of the financial
year concerned the corporation’s liabilities
exceed its assets; or
iii) that the annual financial statements
incorrectly indicate that as at the end of
the financial year concerned the assets of
the corporation exceed its liabilities, or has
reason to believe that such an incorrect
indication is given, he shall forthwith by
registered post report accordingly to the
Registrar.

financial statements, irrespective of whether or not

the financial statements are patently incorrect or
misleading.

It is our contention that the accounting officer should

Given the above, the barest minimum an accounting
officer is expected to do is issue his report after
agreeing the general ledger balances to the annual
go above and beyond to ensure that the annual
financial statements reasonably present the financial
position and results of the close corporation so that
you, the member, can issue the financial statements to
the South African Revenue Service or your bankers with
the comfort and knowledge that they will stand up to
scrutiny and not embarrass you in any way.
TAXPAYER-FRIENDLY
CHANGES FOR INDEPENDENT
CONTRACTORS AND PERSONAL
SERVICE COMPANIES
In the past few years many independent contractors and companies
offering personal services have battled against the withholding of
Employees’ Tax from payments made to them by their clients. Dave
Warneke takes a closer look at the new changes that are sure to put a
smile on the face of many.

Often the reason for the withholding
of the Employees’ Tax was that
in terms of the definition of
“remuneration” in the Income Tax
Act, a person was deemed not to
be independent if payments to
that person were made at regular
monthly or other intervals.
This meant that these contractors
and companies, who were in reality
independent from their clients,
were subject to the withholding of
Employees’ Tax as if they had been
employees.
The good news is that with effect
from 1 March 2007, the regularity
of payment will no longer be
decisive in determining whether or
not the contractor or company is
independent.
A further problem that was
experienced by independent
contractors and personal service
companies was that they were also
deemed not to be independent
where the rendering of their
services was subject to control and
supervision by the client as to the
manner in which the duties were
performed or their hours of work.
Also with effect from 1 March 2007,
this criterion is only to be taken
into account where the services are
required to be performed mainly at
the premises of the client.
In other words, where the services
are not required to be performed
mainly at the premises of the client,
control and supervision is no longer
decisive in determining whether or
not the contractor or company is
independent.

A LEGALLY
SANCTIONED WAY OF
GETTING AROUND
CAPITAL GAINS TAX
The disposal of growth assets to trusts
can now be done with no adverse
Capital Gains Tax effects. Dave
Warneke explores this new territory.
Where a taxpayer has a growth
asset in their own hands, or owns
the shares in a company that in
turn holds the growth asset and for
reasons of estate planning wants to
get the asset out of their hands and
into a trust, a rollover is afforded by
section 42 of the Income Tax Act.
This means that a capital gain
that may otherwise have arisen
in the individual’s hands can be
circumvented. In this structure the
trust would end up holding up to
80% of the shares or members’
interest in a company or CC with
the individual holding a minimum of
20%. In this way up to 80% of the
ownership in the underlying asset
can effectively be transferred to the
trust.
The company or CC then takes
over the asset at the individual’s or
company’s base cost and a capital
gain in the hands of the individual
or company is rolled over. It must
however be borne in mind that
in order to be able to get around
capital gains tax in this manner the
restructuring should be done mainly
for reasons other than for tax
planning. Where the growth asset
is residential property, one must
bear in mind that transfer duty at a
flat 8% of the market value of the
property would have to be paid.
Where the growth asset is
commercial or industrial property,
it may well be possible to structure
the transaction as being VAT
neutral, through the sale of the
property as a going concern. If you
are in this situation, please contact
our tax department to discuss this
matter further.
A WORD OF ADVICE
Going with
the cash flow
Whether you’re running a giant-
sized international corporation, or
a small one-man band business
concern, there is one thing that
both business owners struggle to
maintain: an adequate cash flow.
While this is a seemingly simple and
seemingly obvious concept, getting
your cash flow levels right is one of
the hardest things to do. Without
cash, a business must eventually
close its doors.
Here are some basic principles to
help you get on the path to financial
cash flow freedom:
Do your invoicing. If you don’t
invoice clients, you’re not going to
get paid. Simple.
Work on a retainer basis. Find
clients who are willing to pay you a
guaranteed amount of money each
month.
Watch those cheques. Cheques
can take up to at least 10 business
days before they clear. This may just
be the difference between whether
you sink or swim.
Accept credit cards. That way
you can get paid within days.
The associated expenses may be
negligible when you consider the
alternatives.
Get some or all of your money
up-front. Then try to spread the
remaining payments so you cover
all your ongoing expenses for the
project.
Keep an ear to the grapevine.
Ask others who have dealt with a
potentially new client and find out if
they received prompt settlement.
Catch credit problems early.
Don’t wait until clients are months
behind in payment before chasing.
Raise your prices. What you were
charging 3 - 4 years ago, may not
be making you the profit you need
anymore.
(source http://www.businessknowhow.com/
money/cashflow.htm)
‘TIL DIVORCE DO US PART?
The last thing on a person’s mind when contemplating divorce is
estate planning. However, as Peter Prentice points out, perhaps it
should be given more priority.

On divorce your will automatically
lapses. Ah, you say, that’s not
so bad as this will prevent my ex
from inheriting in the event of
my untimely death. WRONG! On
divorce a will lapses and has no
force or effect for a 3 month period
only.
Should you fail to renew your
will, your pre-divorce negotiations
and battles over the division of
assets may come to naught as
your lapsed will is automatically
reinstated after 3 months and your
ex may laugh all the way to the
bank as he or she may very well
inherit everything.
Be warned, check the nominated
beneficiary on your life policies.
Divorce may also affect a child’s
inheritance. For example, when a
man remarries, then dies leaving
valuable property such as Kruger
Rands, antiques or artwork, it may
be extremely difficult for a child
to prove that the deceased father
did not donate the property in
question to the stepmother during
his lifetime.
So think carefully about estate
planning in the event of divorce or
re-marriage.

Q: My personal tax return was not submitted to
SARS before 31 October 2007, will I be penalised
by SARS?
A: SARS will not be charging penalties on individual tax
returns that are submitted via their e-filing facility as
long as the returns are submitted before 31 January
2008. Cameron & Prentice is registered on the e-filing
system and all personal income tax returns that are
submitted by us to SARS after 31 October 2007, are
submitted via the e-filing channel.
Q: When is an individual taxpayer required to
submit a statement of assets and liabilities to
SARS?
A: In terms of the 2007 tax return brochure a
statement of assets and liabilities is required from
a director of a company, a member of a CC or any
individual in receipt of income from a business, trade
or farming activity. In 2006 a statement of assets and
liabilities was also required from an individual whose
gross income from investments exceeded R100 000.
Q: When will the new Companies Act take
effect?
A: The Department of Trade and Industry has indicated
that the new Companies Act should be promulgated
before the end of 2008. It is however envisaged that
the new Companies Act will only be implemented with
effect from 1 January 2010.
Q: If I have not yet submitted my 2006 income
tax return, will I still be able to complete and
submit the “old” form to SARS?
A: SARS has indicated that they will no longer be
accepting income tax returns in the “old” format.
Where tax returns for the 2006 tax year and earlier are
to be submitted, new forms will have to be obtained
from SARS, either online or from a SARS office.
SARS has indicated that where it receives tax returns
for 2006 and earlier on the original forms, these
returns will be rejected and returned to the taxpayer
concerned.

(overheard)

SARS plans to audit larger CCs