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How do I add a new sole-proprietor business to my ITR12?
How do I add a new sole-proprietor business to my ITR12?
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Direct answer
Add a new sole-proprietor activity by completing the current ITR12 trade questions honestly and then entering income and expenditure from a complete, dated set of business records. SARS states that a sole trader must declare business income on the ITR12. The return should reflect the facts of the activity, including when it started, what it did and the records available, rather than a preferred tax result.
A sole proprietorship is not a separate company. The individual taxpayer reports the trade on their individual return, but this does not settle separate questions about VAT, employees' tax, other registrations, licences or contracts. Keep those issues distinct from the ITR12 trade entry.
What this means in practice
Prepare the records before opening the return. Create an income schedule with invoice date, customer, service or goods supplied, amount received, payment reference and tax period. Create an expense schedule with supplier, date, purpose, amount, supporting document and any personal-use allocation. Reconcile both schedules to the business bank account, cash records and outstanding invoices where relevant.
Identify the true start date. It is not always the day a payment reached the bank account. A taxpayer may have incurred setup costs, entered contracts, advertised, acquired stock or started providing services earlier. Record the factual sequence and retain source documents. If there was no trade in the relevant period, do not invent activity simply because a business name was reserved or a bank account was opened.
Use the current eFiling journey. SARS provides current guidance on customising the ITR12, and the questions shown depend on the answers given. Answer trade questions from the schedules, then review every displayed container. Screens and labels can change, so a historical screenshot or advice based on a prior season is not a substitute for the current guide.
Classify the entries cautiously. Business turnover, reimbursements, private transfers, loans, capital contributions and personal receipts should not be added together just because they passed through one account. Likewise, a receipt supports expenditure but does not itself prove that the full cost is deductible. Identify the business purpose, tax period, whether the cost is capital or recurring, and any private element before making an entry.
Step-by-step
- Build an activity file.
Record the trade description, start date, customers, contracts, invoices and bank details. Use documents that show what actually occurred.
- Prepare reconciled schedules.
List income, expenses, debtors and payments. Reconcile totals to bank and accounting records before entering them in the return.
- Separate business from personal amounts.
Identify loans, owner contributions, private transfers and reimbursements. Do not present them as turnover without evidence.
- Complete the current ITR12 trade questions.
Use eFiling's current workflow and read every declaration before submitting. Do not rely on an old field sequence.
- Review deductions separately.
Record purpose, timing and private use for each expense. Retain invoices, contracts and allocation workings.
- Keep the final file.
Store the submitted return, financial statements, reconciliations and SARS assessment for at least the record period SARS specifies.
Documents and records to keep
- Customer contracts, quotes, invoices and payment records.
- Business bank statements, cashbook and reconciliations.
- Supplier invoices, receipts and expense-purpose notes.
- Inventory, asset and debtor records where relevant.
- Submitted ITR12, assessment and current correspondence.
Important limits and exceptions
This guide does not decide whether a business is profitable, whether an expense is deductible, whether a loss may be used, or whether another tax registration is necessary. A new activity can have VAT, PAYE, provisional-tax, employment or industry issues outside an individual return.
Do not hide a trade because it made a loss, is small, has one customer or began late in the year. Conversely, do not label employment income as a sole-proprietor trade without checking the contract, IRP5 and facts.
When to get tailored advice
Seek advice for a trade with employees, stock, imported goods, foreign clients, material start-up costs, losses or unclear worker classification. TaxProof can prepare the ITR12 schedules and evidence file.