What should I do if I cannot afford to pay my debt to SARS within their timeframe?

The long answer

This is what SARS says on their website about payment by instalment arrangement like the one that you entered into in 2017, in terms of the Tax Administration Act (TAA), under Tip 2: "If the taxpayer has defaulted on a previous payment arrangement, reasonable and valid reasons for the default must be provided before another deferment request can be requested."

As you stopped paying the monthly instalments in 2020 and were subsequently informed by SARS that your debt had increased to R20,000 and that you had to pay it off within one year, SARS would have considered that you had defaulted on your previous payment arrangement. That would have weakened your case to be granted another payment deferment arrangement by SARS. 

Section 168 of the Tax Administration Act (TAA) says that the following conditions must apply for SARS to grant a payment deferment arrangement:

(a) The taxpayer suffers from a deficiency of assets or liquidity which is reasonably certain to be remedied in the future

(b) The taxpayer anticipates income or other receipts which can be used to satisfy the tax debt

(c) Prospects of immediate collection activity are poor or uneconomical but are likely to improve in the future

(d) Collection activities would be harsh in the particular case and the deferral or instalment agreement is unlikely to prejudice tax collection

(e) The taxpayer provides the security as may be required by the official.

It seems likely that because your business had not recovered by the time you tried to make a new payment by instalment plan with SARS, they could not see that your financial situation would be "reasonably certain" to improve in the future. That means that they would not be able to grant a further deferment plan in terms of Section 168 of the TAA to settle the outstanding R39,000 tax debt.  

According to an article by The Accounting Village about dealing with SARS debt, SARS can do the following to collect the debt:

• Collect the money against any third party in terms of section 179 of the TAA

• Issue a civil judgement against the taxpayer

• Attach the assets of the taxpayer

• Hold the directors/members/related parties liable for the debt

• Sequestrate/liquidate the taxpayer

• Preserve the assets against the debt.

(What a third party refers to above is generally the bank.)

SARS does have to give you notice that it is intending to use any of the above methods to settle your debt. 

It is always recommended that you approach SARS rather than wait for the blow to fall, so perhaps you should gather all the documents you have about your business and your personal finances and approach them for another meeting. You can contact them at contactus@sars.gov.za or at 0800 00 7277, where you will first be asked to give your tax number and your ID number.

It would also be a good idea to ask for help from a tax practitioner.

Wishing you the best,
Athalie