Tax cases – High Court

On 23 March 2015, SARS issued a letter of finalization of an audit, which outlaid the taxpayer’s, i.e., HAB personnel Services CC (“HAB”) business plan to render construction services for clients at the taxpayer’s “allocated” site. Mr Mc Dermid, trading as Kriel Business Solutions (“KBS”), performed services at the allocated site of the taxpayer, i.e., HAB and utilized the taxpayer’s employees in 2011. In 2012 and 2013, the working conditions changed and were performed on KBS’s premises with five employees not on HAB’s payroll. As such, SARS regarded KBS as an independent contractor for the 2012 and 2013 years of assessment, and for the 2011 year of assessment regarded Mr Mc Dermid (“Mr M”) an employee of HAB due to work performed on the taxpayer’s premises and under stipulated and supervised hours. The SARS assessment reflected that HAB was obliged to have deducted PAYE and SDL for remuneration paid to Mr M. Mr Aslett, the second individual, was trading as JFJ Construction (“JFJ”) and performed work under supervision on the taxpayer’s premises with the use of the taxpayer’s employees. It was declared that JFJ had no employees of its own and would reimburse HAB for use of its employees. The SARS assessment reflected that Mr Aslett, (“Mr A”), was not an independent contractor, and accordingly HAB was also obliged to withhold PAYE and SDL for remuneration paid to Mr A. The under-declaration of PAYE and SDL by HAB on Mr M and M A’s remuneration resulted in penalties and interest becoming payable. On 19 August 2015, the taxpayer objected to the SARS’ audit findings by emphasising that Mr M should be considered an independent contractor for 2011 tax year as he met the requirements relating to premises and supervision. Additionally, SARS should separately consider Mr A’s capacity as technical advisor and independent contractor as the PAYE remuneration is only deductible on the remuneration as technical advisor. SARS disallowed the objections, and the taxpayer lodged an appeal with the tax court on 17 November 2015. The tax court dismissed the taxpayer’s appeal.