The South African Revenue Service has admitted that a final demand sent to a taxpayer over an outstanding balance of just one cent was issued by mistake.

SARS confirmed the error after questions were put to the revenue service about the unusual demand.

“The letter was issued in error,” SARS said.

The revenue service did not explain how the mistake happened or whether balances as small as one cent can affect tax compliance, refunds or future collection action.

Taxpayer told to settle one cent

The case was first reported by Moneyweb after an unnamed taxpayer provided a copy of the demand with identifying information removed.

The taxpayer was reportedly instructed to pay the R0.01 balance within 10 business days.

The notice also included the usual options available to taxpayers facing debt, such as applying to defer payment, disputing the amount, seeking suspension or requesting a compromise.

The taxpayer reportedly questioned whether the notice had been generated automatically and whether any human review had taken place before it was sent.

Small debts can cause bigger problems

The case has renewed attention on how minor outstanding balances can affect taxpayers.

Moneyweb previously reported on another case in which a R323,000 refund was blocked because SARS considered the taxpayer to be R50 behind on their PAYE profile.

The reason for the blocked refund was reportedly not immediately clear to either the taxpayer’s accountant or a SARS consultant and had to be escalated.

SARS guidance also allows the revenue service, after a final demand, to appoint third parties such as employers or banks to pay money directly towards outstanding tax debt.

Previous SARS errors reached the courts

Errors by SARS have also featured in earlier tax disputes.

In a 2016 Tax Court case, the court considered two admitted SARS assessment errors when reducing additional tax imposed on a taxpayer from 50% to 35%.

In a separate 2019 matter, the Supreme Court of Appeal noted that SARS had made several calculation errors, which were later corrected by a forensic auditor.

SARS also acknowledged a correspondence error in 2013, when some taxpayers received final demands instead of reminders.

The latest one-cent case again puts the spotlight on the accuracy of automated tax correspondence and the impact even tiny balances can have on taxpayers.