TAX RISKS FOR TRUSTEES

If you are the trustee of a trust that fails to submit income tax returns or to pay PAYE or VAT to SARS, you face criminal prosecution even if the trust is financially unable to pay. A recent High Court case confirmed the conviction and sentencing of a trustee (as representative taxpayer), pointing out that a trust itself cannot be charged with a criminal offence. Moreover, the Court held that even if the trust's dire financial position had made it impossible to pay VAT and PAYE, that would have been no defence.


BUREAUCRATIC DECISIONS: DEMAND JUSTICE

We are all constantly affected by the administrative decisions of government departments. Sometimes such decisions have massive financial implications for our businesses (think of tax assessments or licence applications), or far-reaching personal consequences (e.g. residence or citizenship applications).

When your rights are affected by any such decision (or failure to take a decision!) you are entitled to require (a) that fair procedures be followed in making the decision, and (b) that you be given "adequate reasons" for the decision.

If a decision goes against you, you can challenge it in court.

But don't delay - you only have 180 days from the day of the decision to apply for review. That may seem like a long time, but it can pass very quickly if you are engaged in a "to and fro" communication process with a bureaucracy! The High Court has discretion to give you an extension, but will only do so where "the interests of justice so require" - a recent decision confirms that the onus is on you to show something more than prejudice to your own interests. Bring in the legal cavalry early.


CLOSE CORPORATIONS: NEW REQUIREMENT FOR ANNUAL RETURNS

If you have a CC, note that, from 1 April 2007, you must lodge annual returns to CIPRO - the same returns as companies have been lodging since 2005 (mostly statutory and turnover detail). Returns must be submitted in electronic format, and delay will incur penalties. Failure to lodge for 6 months risks deregistration. Returns are due by the end of the month following the anniversary of incorporation.


TRUSTS: IDENTITY OF INTEREST NOT ALWAYS A PROBLEM

In the September 2006 issue article "Trust Assets - When Are They At Risk?" we looked at the need to have "functional separation of ownership and enjoyment" in a trust's assets, a concept that will cause concern wherever trustees and beneficiaries have closely related interests.

However the Supreme Court has recently held that there is nothing wrong with trustees and beneficiaries having an "identity of interest" in so far as the objects of the trust are concerned, nor (in the absence of any element of fraud or wrongdoing) is there necessarily anything wrong with corporate trustees and beneficiaries having the same shareholder and directors.

The distinction is a fine one, and emphasises the need to structure and administer trusts correctly.


PROPERTY DEVELOPERS MUST REGISTER WITH NHBRC

Where a residential property developer engages a building contractor to do the actual construction, both developer and the contractor must register with the National Home Builder's Registration Council. The business of a "home builder" is not limited to construction; it includes "to cause a home to be constructed for any person".

So if you are buying into a development, ask to see all proofs of enrolment up front. The High Court has held that a developer's failure to register did not render the sale agreement invalid to the detriment of the buyer; but you may not get a bond without both builder and developer being properly registered, and enrolment of your home reduces your risk in case of problems.


WHO IS (AND WHO ISN'T) AN "EMPLOYEE"?

Whether or not a person doing work for/with you is, or isn't, your "employee" for the purpose of the relevant legislation, can make a huge difference to your rights, responsibilities, and risks in relation to that person. And vice-versa if you are the employee/contractor.

The bad news is that it can be extremely hard to work out - the legislation and decided cases are many, complicated, and often obscure. Happier news is that Nedlac has just issued a "Code of Good Practice: Who is an Employee". Although the Code's 53 pages of legalese are definitely not for the layman, they will help your attorney to structure your employment contracts and policies correctly - so now is a good time to have them re-assessed.


WHEN MAINTENANCE SURVIVES REMARRIAGE

If a divorce settlement provides for maintenance to be payable by one spouse to another, it is implied that it will lapse on remarriage or death by the recipient. This is a logical implication, but do not rely on it unless you wish to risk long and expensive litigation.

To avoid uncertainty, make sure that the agreement clearly specifies exactly what effect remarriage will have on maintenance.

In a recent Supreme Court matter, it was agreed in the settlement that maintenance would be paid for 26 months after divorce - then, after 2 months, the recipient remarried. The Court held that by specifying a time period, the agreement provided that the duty to pay continued regardless of remarriage - which probably wasn't at all what the payer had envisaged.


HOW TO LOSE YOUR LAND - BY DOING NOTHING

If you own immovable property, allowing someone else to occupy it openly, and as though they own it, could cost you your ownership (through "acquisitive prescription"). Admittedly only after 30 years of occupation, which may not seem like a likely scenario in the 21st century. But it does happen, as evidenced in a recent Western Cape case where an occupier had indeed reached the magic 30 year mark without being dispossessed.

The owner could easily have lost ownership - but fortunately for her, the Court found on the facts that she had asserted her ownership before the 30 years was up, and that the occupier had acknowledged her rights as owner by negotiating for purchase, thus interrupting prescription.


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