Please Sir, can I have some more?
Please Sir, can I have some more?
By Hylton Cameron, Director
In this article I unpack when you should ask SARS for more (some people would say SARS has already given them more than enough: headaches) – however in this instance, we are discussing when you should ask for more information as to why SARS has assessed you in a certain way.
Briefly, after a taxpayer receives an assessment, the taxpayer may request reasons for the assessment. This is a right granted to the taxpayer in terms of Rule 6 of the Tax Court Rules.
In the Tax Court case BCJ v CSARS (case 2024/8), in which judgment was handed down on 23 May 2025, this issue was before the court.
The background facts of the case are somewhat confusing. Fortunately for purposes of the current discussion, they are not particularly relevant.
Background to the matter
Due to various transactions, a Letter of Findings (LOF) was issued by SARS on 22 June 2023, which stated that, in SARS’ view, the provisions of the general anti-avoidance rules (GAAR) were applicable.
This conclusion was based on, amongst other points, that the transaction (our underlining):
“..[W]as not carried out in a manner which would normally be employed for bona fide business purposes other than obtaining a tax benefit, as contemplated in section 80(a)(i);”
This is one of the requirements for the GAAR to apply. Stated in the reverse, there must be something abnormal. The taxpayer stated in a letter in response to the LOF that it must be objectively determined if something was abnormal, and SARS bears the burden of proof in this regard.
SARS stated in its heads of argument that it had assumed for purposes of argument that is bears such onus of proof. If the onus had been on the taxpayer, we would not have expected SARS to assume it bore such onus, which in our view does provide an indication of SARS’s view, i.e. they accept they bear the onus. However, we caution that SARS did not concede this point in general.
Per the same letter, the taxpayer stated that SARS had failed to demonstrate that the arrangement occurred within a business context. In terms of the law, for the GAAR to apply in terms of the above criterion, the transaction must be abnormal in a business context.
The letter did not elicit a response from SARS and SARS issued a letter of assessment on 20 November 2023 (LOA). The LOA did not address the above issue i.e. that in SARS’s view, the arrangement had occurred within a business context.
As mentioned above, in terms of Rule 6 of the Tax Court Rules, after a taxpayer has received an assessment, the taxpayer can request “Reasons for the Assessment”. Such reasons will enable the taxpayer to formulate an objection to the assessment. The reason for the rule is obvious: if a taxpayer does not know the reasons for the assessment, it is difficult to object against the assessment. Often the reasons seem obvious, or the reasons are given in the assessment and the issues are clear. Nevertheless, a taxpayer should always check if sufficient reasons have been provided and, if not, a Request for Reasons should be submitted before an Objection is provided to SARS.
I do concede that sometimes the submission of a Request for Reasons to SARS can be a waste of time and costs, and therefore the issue of whether to request reasons is something that should always be considered but reasons do not necessarily have to be requested. One must consider the issues in totality, including costs. Also, if the taxpayer is just wasting time and there is little chance of being successful, interest on any outstanding tax amount will be accumulating, and such Request for Reasons will simply delay the final outcome and increase the interest due.
Returning to the case at hand, the taxpayer requested reasons for the assessment as to why SARS alleged that the arrangement occurred within a business context.
Despite various responses from SARS, this question was not answered (at least to the satisfaction of the taxpayer) and the taxpayer took SARS to court (per another Rule of Court), so the court could decide whether or not SARS had provided an adequate response in terms of Rule 6.
The obvious question that arises is what should be considered as adequate in terms of what SARS needs to provide the taxpayer in these circumstances. The case provides a good summary:
“For reasons to be adequate, it must constitute more than mere conclusions. It should refer to the relevant facts and law as well as the reasoning processes which resulted in the conclusions. Not only should CSARS inform the taxpayer of its decision, but also of the reasons for its decision in a simple manner which does not require the taxpayer to speculate or assume the reasons therefor. These prerequisites for valid reasons are encapsulated in Ansett Transport Industries (Operations) Pty Ltd & Another v Wraith & Others and quoted with approval in Commissioner for South African Revenue Service v Sprigg Investment 117 CC t/a Global Investment wherein it held that:
“[T]he decision-maker [must] explain his decision in a way which will enable a person aggrieved to say, in effect: “Even though I may not agree with it, I now understand why the decision went against me. I am now in a position to decide whether that decision has involved an unwarranted finding of fact, or an error of law, which is worth challenging.” This requires that the decisionmaker should set out his understanding of the relevant law, any findings of fact on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions. He should do so in clear and unambiguous language, not in vague generalities or the formal language of legislation.”
From the above discussion it is clear that a taxpayer is entitled to ask SARS the reasons why they have assessed the taxpayer in a certain way. In many cases the reason for the assessment is not clearly stated on the assessment. This procedure if often overlooked, and therefore I remind taxpayers to keep such action in mind. Finally, if SARS does not respond adequately, one does not have to beg - the taxpayer is granted the statutory right to request reasons – and SARS can be forced to respond, like the taxpayer in this case, who was successful in forcing SARS to respond.