IEASA National - News

Estate Agents with overdue taxes may lose commission   Article Date :29 May 2006 Receiver track estate agents sales. Estate agents throughout South Africa are now being caught by The Receiver of Revenue for arrears on their income tax, company tax, VAT and PAYE - with sometimes embarrassing results, says Bill Rawson, President of the Institute of Estate Agents. “As we all know,” he said, “The Receiver’s office has become far more efficient in the last decade. One result is that both companies’ principals and the individual agents who have failed to pay their taxes on time are now likely to find that their commissions are attached by the Receiver working through their transfer attorneys - who are now by law obliged to do this, ahead of any other creditors the agency or agent may have.” The attorneys, said Rawson, in terms of a new transfer duty application form have to submit the tax numbers of any agency principals and their agents who were involved in the sale of a property and will benefit from the transaction. When a property transfer goes through, a simple cross-reference system enables The Receiver to see if any taxes are still outstanding and attach the commission payable to the agent - despite any other instructions that may have been previously issued by the debtor himself. “The Receiver’s actions,” said Rawson, “are causing havoc in many agencies and in some cases this has been due to SARS’ records not being up to date.” In some agencies, said Rawson, principals have been unable to pay their agents, causing hardship and even, in one case, the collapse of the business. "I believe that many will soon follow suit," he said. To avoid this, he advises, agents with tax arrears to do a deal with The Receiver as soon as possible. “The amnesty for small businesses announced in this year’s budget speech,” said Rawson, “makes it possible to find a way out of these difficulties provided you are open and honest with The Receiver.” Rawson said that in his experience most of the tax problems encountered by agents stem not from dishonesty but from a lack of accounting and clerical skills which, he said, are not often found among good sales people. “Understandably, their focus has to be out there in the field, dealing with clients. They often find it extremely hard to get down to detailed financial calculations.” New agents, he added, should try to ascertain their agency’s tax position before signing an employment contract with them as their commission can be withheld if the agency's tax payments are not up to date. The challenge is that this can be difficult because The Receiver is by law not allowed to disclose information to a third party. "Another concern arises when two estate agencies share a transaction and the one agency has to pay the other. The latter may now be at risk, should the former agency's tax is not up to date or in question. We recommend that in such cases that all agencies who are entitled to commission should be included as a mandatory term of the agreement so that both the transferring or conveyancing attorney and the Receiver of Revenue are aware upfront of the shared entitlement." CLICK HERE TO RETURN TO THE MAIN NEWS PAGE