By Charlene Clayton
A group of concerned taxpayers is taking the South African Revenue Service
(SARS) to court over its attempt to collect transfer duty from trusts that
own property to which beneficiaries have rights.
SARS is attempting to collect transfer duty dating back to 1998 from these
trusts.
Many individuals who became beneficiaries of trusts were lead to believe,
often by estate agents, that changing the names of the beneficiaries in a
trust, rather than purchasing property in their own name, was a legitimate
way of acquiring property and that no transfer duty was payable in these
instances.
In December last year the Transfer Duty Act was amended and in terms of this
amendment, transfer duty is specifically triggered in discretionary trusts
when the names of one or more beneficiaries, with a contingent right to any
(residential) property, have been changed or added.
At the time, SARS confirmed that it was conducting audits on trusts by
checking through trust deeds at all nine Masters offices towards the end of
last year. A SARS spokesperson said that 134 letters were sent out to
trustees to establish whether transfer duty was paid when the beneficiaries
of these trusts had been changed.
If the trust had not paid transfer duty, these "letters of finding"
automatically became a tax assessment 10 days after receipt, the spokesman
said.
It has been estimated that SARS is looking to collect R10.7 million in this
way (based on the 134 letters of demand which have been sent out, and
estimating that the average amount of transfer duty involved is R80 000).
Certain concerned individuals have appointed a Johannesburg firm of
attorneys, Moss Morris, to represent them against SARS in order to obtain
clarity on this matter because they do not believe that they are liable for
transfer duty under the old Transfer Duty Act.
Robyn de Kock, of Moss Morris Attorneys, says it is important to note that
the transfer duty on the trusts is in terms of the historic legislation and
not as a result of the 2002 amendment to the Transfer Duty Act.
SARS' case hinges on the (historic) definition of a "transaction" in the
Transfer Duty Act and whether a change of beneficiaries who only have a
contingent right or expectation to share in the property owned by the trust,
can constitute an "acquisition of property" upon which transfer duty is
leviable. The interpretation of trust law and the rights of beneficiaries
also plays an important role in this debate.
It is essential both for SARS and taxpayers that this matter be decided by a
court of law in order that there can be certainty on this controversial
issue, De Kock says.
Jacob Dlamini, a spokesperson for SARS, says SARS is well aware of the
taxpayers' argument in this matter, but holds a different view. There is a
case before the courts at present and SARS does not wish to comment on the
case before the courts have made their ruling, he says.
Individuals who have received letters of demand from SARS because they are
beneficiaries of trusts which own property can visit the website
www.myrights.co.za <http://www.myrights.co.za> which has been set up by
Johannesburg businessman Peter Barbas.
He says the idea behind the website is to get more individuals to
collectively get clarity on an issue that many property buyers were
completely unaware of until they received letters from SARS.
The legal system in South Africa does not allow the small man to fight in
court, he says. The purpose of the website is to provide a virtual meeting
place for those seeking support on issues of concern.
Issues can also be taken further by lodging a complaint against an alleged
errant organisation or body with a relevant authority or by fighting the
issues in court, Barbas says.
The benefit of a class action system is that the costs for each party are
much lower and it allows the group to afford the best legal representation
to take issues to court.
"Organisations must be accountable for their actions or failure to take
action," Barbas says.
Publisher: Personal Finance
Source: Personal Finance
Trust beneficiaries take SARS to court over transfer duty August 2, 2003.
Posted On Monday, 04 August 2003 02:00 Published by eProperty News
A group of concerned taxpayers is taking the South African Revenue Service (SARS) to court over its attempt to collect transfer duty from trusts that own property to which beneficiaries have rights.
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