Editorial

• Jurisdiction: South Africa
• Author: Des Kruger
• DOI: 10.10520/EJC173382
• Published date: 01 September 2014
• Date: 01 September 2014
• Pages: V-VII
• Published By: Siber Ink

v

© SIBER INK

Editorial

DES KRUGER

The three articles that appear in this edition of the journal all deal with

very topical issues.

The article by Milton Seligson SC deals, in particular, with the impact of

business-rescue proceedings on SARS’s claims for tax against the company

under business rescue, both prior and subsequent to the commencement of

business-rescue proceedings. It is apparent that there is a wide divergence

of views between SARS and business-rescue practitioners as to the correct

treatment of SARS’s claims for outstanding tax against a company under

business rescue. After a very thorough analysis of the law, the learned

author concludes that the answer to the conundrum differs depending

on whether the outstanding taxes relate to income tax or self-assessment-

type taxes, such as value-added tax (‘VAT’). The article concludes that,

on a proper interpretation of section 135(3) of the Companies Act, 2008,

neither VAT (and the other self-assessment employee taxes) relating to

pre-business-rescue tax periods, nor income tax relating to such periods

(but only assessed after business rescue has commenced), can constitute

claims arising ‘out of the costs of business-rescue proceedings’ and will

not therefore enjoy any preference over other current creditors. However,

VAT (or similar self-assessment employee taxes) and income-tax liabilities

arising in relation to the conduct and operation, post-commencement, of

the company’s business by the business-rescue practitioner would consti-

tute claims arising ‘out of the costs of the business-rescue proceedings’ as

contemplated in section 135 of the Companies Act, and will enjoy the

‘super’ preference conferred on such claims by section 135(3) of the Act.

The article also addresses another important VAT issue that arises, that

is, whether section 22(3) of the Value-Added Tax Act, 1991 Act gives SARS

a ‘clawback’ claim for input tax deducted by the company where there are

unpaid creditors who have not been paid for supplies made to the company

within twelve months after the expiry of the tax period within which the

relevant deductions were made. The article concludes that business-rescue

proceedings do not affect SARS’s claims in terms of section 22(3) where the

twelve-month period ended prior to the commencement of business-rescue

proceedings, but that where the twelve-month period ends after business-

rescue proceedings have commenced the conclusion is that it is properly to

be treated as a claim arising ‘out of the costs of the business-rescue proceed-

ings. The result is that SARS would probably enjoy the ‘super’ preference

provided for in section 135(3) of the Companies Act. It is further submitted