Lothando comes to see you. She owns a printing and photocopy business called Thando’s Copy Shop. Thando’s Copy Shop is a company. The company is registered for VAT. Lothando’s problem is that she has to pay VAT to SARS before some of her clients have paid her. She also spends lots of time every month filling in the forms. She asks you to help her.

WHAT YOU CAN TELL HER

Ask Lothando what her turnover is. Turnover means all the money that comes into the business before subtracting the money it costs to run the business.

Remember to subtract 15% VAT from the turnover, because the VAT does not belong to the business. The company is collecting the VAT for SARS. If the turnover is less than R1 million per year, then the company does not have to charge its customers VAT. Then she can tell SARS that she does not want the company to be a registered vendor anymore. But it may be a good idea to stay registered if the VAT that Lothando can claim back from SARS, which she has paid when buying things for the business, is more than the VAT the company has to pay SARS. (See Who should register as a vendor?)

Ask Lothando whether she has been subtracting the VAT she pays (called an input credit) from the VAT she pays to SARS. (See Claiming input credits)

Help Lothando decide whether she should stay registered or not. Ask Lothando to show you the invoices for all the money she spends on the business, such as paper, ink for the machines, rental for the photocopy and printing machines, rental for the premises, electricity and water. See whether she pays VAT for these things. Add all the VAT together, to see how much VAT she can claim back from SARS.

For example, if the turnover of Thando’s Copy Shop is R5 000 per month, the turnover for the year would be 12 x R5 000, which is R60 000. Thando’s Copy Shop does not have to register for VAT, but Lothando can register for VAT if she wants to.

The VAT on R60 000 would be R9 000. Lothando would have to add 15%15% to her prices. If the VAT she pays on the things she buys for her business is less than R9 000 per year, then it is a waste of Lothando’s time to collect VAT for SARS. Also, it could make her prices more expensive than her competitors! Lothando should tell SARS that she does not want Thando’s Copy Shop to be registered anymore.

If the VAT she pays on the things she buys for the business is much more than R9 000 per year, then it could make sense for her to collect VAT for SARS. For example, if the VAT she pays is R12 000 per year, it means SARS will pay her the difference between the VAT she collects from her customers R9 000) and the VAT she pays (R12 000). SARS will have to pay Thando’s Copy Shop R3 000.