Paying tax by cheque – Think TWICE!

chequeOf course you must pay SARS its dues, but think twice before doing so by cheque.  A recent High Court case illustrates the danger.

The facts

  • A taxpayer owed SARS R432,375-34 for VAT
  • It drew a post-dated cheque, crossed and marked “not transferable” in favour of SARS for the amount due
  • It hand delivered this cheque to the local SARS branch office and a receptionist there signed for it in the branch’s “delivery record”
  • The cheque was never deposited by SARS.  Instead, apparently as part of a scam prevalent at the time, it was “probably stolen by a person unknown” and then cloned, with the payee changed from “SARS” to a third party which was duly paid out by the collecting bank
  • As SARS hadn’t deposited the cheque, the taxpayer still owed it the VAT due
  • To avoid penalties and interest, and in order to get a tax clearance certificate, the taxpayer made out a second cheque to SARS, and this time SARS received payment
  • Down now by the “duplicated payment” of R432,375-34, the taxpayer sued SARS on the basis of an old Roman law remedy designed to ensure that no one is unjustifiably enriched at the expense of another.  In the alternative it alleged that SARS owed it a “duty of care” and had acted negligently and wrongfully in regard to the manner in which it dealt with the first cheque delivered to its offices.

The finding

The Court dismissed the taxpayer’s claim, finding that SARS had not been enriched, that the taxpayer had made the second payment in terms of a legal obligation to do so, and that the alternative claim fell away when SARS became “the true owner” of the first cheque.  There are indications in the judgment that the taxpayer could possibly have considered other remedies against SARS and/or a claim for negligence against the paying bank, but the point remains – pay your tax via cheque at your peril!

Ashersons Attorneys

Ashersons Attorneys

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