In recent years, SARS has become far more active in using personal liability notices as part of its collection strategy. Where these notices were once reserved for serious cases, they are now appearing with increasing frequency. For any business owner, director, or shareholder this shift changes the playing field entirely. It means that certain circumstances can see SARS turn its attention away from the company and focus directly on the people who run it.
What Is a Personal Liability Notice (and when does it apply)?
Personal liability notices aren’t a one-size-fits-all tool. The law contains several provisions that SARS can use in different situations to hold individuals accountable. Here, we’ll briefly look at two of the ones business owners are most likely to come across.
Under section 180 of the Tax Administration Act 28 of 2011 (“TAA”), SARS may hold a person personally liable if that person participates in the management of the company’s overall financial affairs and their negligence or fraud caused the company’s tax not to be paid. This is not a matter of SARS “believing” there was fault. A senior SARS official must be satisfied, on the facts, that the negligence or fraud occurred and that it directly resulted in the non-payment.
Separate from section 180, section 155 applies to a “representative taxpayer” such as a public officer. In these cases, personal liability arises where there were funds available that could lawfully have been used to settle the tax debt, but those funds were used for something else instead. The two provisions have different tests and different triggers, but once liability is validly imposed it allows SARS to recover the debt from the individual’s personal assets, using the same collection powers it would against the company.
Why We’re Seeing More of Them
Personal liability notices have become more attractive to SARS because they cut through some of the delays that can occur when dealing only with a corporate taxpayer especially where the corporate taxpayer is non-responsive. From SARS’ perspective, they increase the likelihood of recovery because individuals have more to lose when their personal assets are in the firing line. It is also a means of applying pressure early in the collection process, particularly in situations where SARS perceives a lack of cooperation or where tax debts are mounting without signs of resolution. This approach has made personal liability notices a much more visible and frequent feature in the debt recovery space.
Why communication with SARS is key
If there is one consistent thread in personal liability disputes, it is that they rarely appear out of the blue. More often than not, they are preceded by a series of missed deadlines, unanswered correspondence, or incomplete responses to SARS queries. Silence, or even delayed responses, can be interpreted as a lack of engagement and can close the window on opportunities to resolve the matter before it escalates.
Even where you disagree with SARS’ position, engaging promptly keeps the lines of communication open and preserves your ability to challenge or negotiate from a position of credibility.
How to reduce the risk of personal liability
The most effective way to reduce the risk of personal liability is to treat SARS notices and deadlines as priority items. This means reviewing every letter, email or eFiling notification as soon as it arrives, and ensuring that a considered response is delivered within the timeframes provided. It also means documenting all interactions with SARS so that there is a clear paper trail showing cooperation and transparency. Where there is any uncertainty about the content or implications of a notice, seeking immediate advice from a tax attorney or experienced tax practitioner is not just wise, it can be the deciding factor in whether liability is imposed at all. Acting quickly allows you to frame the narrative and present evidence before SARS reaches its conclusions.
Under the TAA, once a personal liability notice is issued, the onus shifts largely to the individual to prove why the notice should not stand. The longer this is left unanswered, the more limited the available remedies become, and the greater the likelihood of SARS moving to enforce against personal assets. Engaging early, providing clear representations, and showing willingness to resolve the underlying company debt can prevent escalation and, in many cases, avoid personal exposure altogether.
The Bottom Line
Personal liability notices are no longer a rare, last-resort measure; they are a regular part of SARS’ collection toolkit. For business owners, this means that a company’s tax debt can become a personal problem far sooner than expected. The best defence is early, efficient communication with SARS, backed by a clear understanding of your rights and obligations under the law.
