The novelist, Douglas Adams once wrote, “I love deadlines. I love the whooshing noise they make as they fly by”. But one deadline that an employer does not want to hear fly by is the due date for payment of employees’ tax (PAYE). In Peri Formwork Scaffolding Engineering (Pty) Ltd v CSARS an employer appealed to the Western Cape High Court against a 10% penalty of R1 million imposed by SARS for late payment of PAYE. There were two grounds of appeal, first that the payment was not in fact late, and second, if it was late reasonable grounds for the overdue payment existed.
Employers are required to pay SARS the PAYE deducted or withheld within seven days after the end of the month during which the amount was deducted or withheld. The employer argued that the “statutory method” in section 4 of the Interpretation Act applied when calculating when payment fell due. This requires days to be counted exclusive of the first day and inclusive of the last day of the period within which payment is to be made unless the last day falls on a Sunday or public holiday. In that case, the last day would be the next Monday or ordinary day.
Using the “statutory method”, the first day of the 7-day period was on 1 January 2018 and the last day of the 7-day period fell on Sunday, 7 January 2018. Because it was a Sunday it must be excluded from the 7 days and the last day of the period would be Monday, 8 January 2018, being the date that the employer paid the PAYE.
However, the Court disagreed with the employer’s calculation of days. It held that if a statute is silent about the method of computation of days section 4 of the Interpretation Act will apply. But section 244(1) of the Tax Administration Act clearly states that if the last day of the period in which an employer should make payment falls on a Saturday, Sunday or public holiday, such payment should be done no later than the last business day before such Saturday, Sunday or public holiday. Payment should have been made by Friday, 5 January 2018 and was therefore late.
There are not various degrees of lateness of payment. If an employer is late by 1 day or 20 days, SARS must impose a 10% penalty. Although the payment was late, in this instance, the employer was successful in showing reasonable grounds for remitting the penalty. The employer made every effort to comply with its obligations. It was a first incidence of non-compliance and it raised an overdraft to settle the liability, but was delayed because payment fell over a weekend. The court was, therefore, satisfied that there were reasonable grounds for remitting the penalty.
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