Fixing bona fide errors on tax returns: USP risks

<p>Understatement penalties (USP) and bona fide inadvertent errors after the amendment to section 222 of the Tax Administration Act (TAA): if you correct an error on a return that has already been assessed, has the amendment created a new risk?</p><p>The request for correction function on SARS eFiling, and the objection route where an assessment has already been audited or verified, have been the standard ways to fix a return. Pieter van der Zwan revisits how section 222 protected a taxpayer who came forward with a bona fide inadvertent error, and how the Thistle and Coronation judgments widened the concept of bona fide inadvertent errors to positions taken on tax advice.</p><p>Section 222 was amended at the end of last year and the bona fide inadvertent error ground now sits in section 223(3)(a), tied to the definition of a substantial understatement (the greater of 5% of tax properly chargeable or R1 million). Pieter shares his concern regarding the effect that the amendment may have on correcting true errors. </p><p>The episode considers why the correcting an error may carry more exposure, where the voluntary disclosure programme (VDP) enters the picture, and the question that Pieter thinks the amendment leaves open. </p><p><strong>Timestamps</strong><br>00:10 Introduction <br>02:50 Request for correction and objection under the previous section 222<br>05:10 Thistle and Coronation: tax advice as a bona fide inadvertent error<br>06:30 Amended section 222 and section 223(3A)<br>09:47 Substantial understatement threshold: 5% or R1 million example<br>15:10 Reasonable care and USP exposure below the threshold<br>15:40 Key takeaways</p><p>If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at <a href="mailto:pieter@pvdz.co.za" target="_blank" rel="ugc noopener noreferrer">pieter@pvdz.co.za</a> for feedback or tax advice. More resources at <a href="https://tax.pvdz.co.za/" target="_blank" rel="ugc noopener noreferrer">https://tax.pvdz.co.za</a>.</p><p>Keywords: understatement penalty, USP, bona fide inadvertent error, section 222 Tax Administration Act, section 223(3)(a), substantial understatement, request for correction, reasonable care, objection, voluntary disclosure programme, Thistle case, South African tax</p>