Tax and SARS knowledge base
Can a business use VDP after SARS starts an audit or investigation?
Can a business use VDP after SARS starts an audit or investigation?
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Direct answer
Usually, no. SARS says that where an applicant has received notice that an audit or criminal investigation has started, has not concluded, and relates to the default being disclosed, a VDP application is regarded as not voluntary. That is a central VDP requirement.
The SARS guide does describe a narrow discretion. A senior SARS official may form the view that the default would not otherwise have been detected during that audit or investigation, and that accepting the application would serve good tax-system management and the best use of SARS resources. That is not an automatic exception and should not be assumed from the fact that an audit has a limited scope.
What this means in practice
VDP is intended for a person who comes forward voluntarily to regularise a tax default. It is not a way to relabel an issue after SARS has already identified and begun examining that same issue. Timing and the scope of the SARS notice therefore matter. A notice about VAT for one period may not necessarily describe every other tax type or period, but the question is fact-specific. The company should not make its own broad conclusion about what SARS would or would not have detected.
Start by preserving the correspondence exactly as received. Record the date, the taxpayer entity, the tax products, years or periods, the issues listed, information requested and response deadline. Keep it with the returns, general ledger, bank records, payroll data, invoices and contracts relevant to the potential default. This creates a reliable basis for advice and for any response to SARS.
A company may apply for VDP in a representative, withholding or other capacity. The form and process do not remove the need for a valid disclosure. SARS says that the disclosure must be voluntary, full and complete in all material respects, made in the prescribed form and manner, involve the specified understatement-penalty behaviour, and not result in a refund due by SARS. The VDP unit evaluates the application and may request more information or a meeting.
Step-by-step
- Read the SARS notice before choosing a route.
Identify whether it is an audit notice, an information request, an investigation notice or another communication. Note the exact default or risk stated by SARS. Do not assume that a general review has no connection to an issue simply because the notice does not use the same accounting description your company uses.
- Preserve the underlying information.
Place the notice, returns, financial statements, source records and correspondence in a controlled file. Prepare a period-by-period schedule of potential tax differences. The schedule should separate facts from assumptions and identify any missing records. Do not alter records, backdate documents or create a narrative designed to fit a desired remedy.
- Obtain tax and legal advice on the scope.
The interaction of a live audit and a VDP application can be consequential. Ask an adviser to assess whether the proposed default overlaps the notice, whether a VDP application is potentially valid, and what disclosure or response obligations continue. Advice should be based on the actual notice and records, not a telephone summary.
- Continue to meet audit obligations.
A possible VDP discussion does not automatically suspend an audit, deadline, return or payment obligation. Respond truthfully and on time to SARS requests. If more time is needed, request it through the appropriate channel with reasons and keep evidence of the request.
- If a VDP route remains appropriate, prepare a complete case.
SARS's guide says a detailed application has a better prospect of success. Reconcile the relevant tax amounts, identify every affected period, explain the default factually and attach substantiating documents where available. Supporting documents are preferred by SARS and can include an explanation, schedules and tax calculations.
Documents and records to keep
Keep the audit or investigation notice, all SARS correspondence, a copy of the VDP01 if submitted, the VDP application number, financial schedules, tax calculations, returns, proof of filing and supporting documents. If SARS requests additional information or a meeting, retain the request and the response. Record who approved the company response and the date it was filed.
If a VDP agreement is reached, it is a contract between SARS and the applicant. Keep the signed agreement, payment arrangements and proof that the company has met every undertaking. SARS notes that breach of a material term can lead to cancellation, and incomplete disclosure can lead to withdrawal of relief.
Important limits and exceptions
This guide does not decide whether a particular audit notice prevents VDP relief. The limited discretion described by SARS depends on circumstances and a senior official's view. It is not a certainty that can be obtained by calling an application anonymous, changing the tax label or submitting only part of the facts.
VDP relief is limited to defaults covered by the agreement. It does not mean that all company tax issues have been cleared. A VDP submission should also not be used to file a tax return in order to claim a refund. SARS says such a result does not meet the VDP legislative framework.
When to get tailored advice
Get specialist advice immediately if the company has received an audit or investigation notice and has identified an undeclared amount, overstated expense, payroll issue, VAT error, cross-border item or other material default. Legal advice is particularly important where there is potential criminal exposure, a director or representative is involved, or records are incomplete.
TaxProof can help assemble an evidence index and reconciliation schedule. We cannot decide that a post-notice VDP is valid or negotiate an outcome without a full review.