14 Risk to the Employer
What is the risk to the employer of being caught if the estimate of the travel allowance is too high, or if the 20% inclusion rate is used where the 80% rate should have been used?
Firstly, if the employer’s estimated value of the travel allowance (code 3701 on the tax certificate) exceeds the actual business travel value (logbook) by a margin that SARS find unacceptable, a red flag can be raised to indicate that the employer over-estimated the value of the travel allowance.
Secondly, if the final income tax value is ‘considerably’ more than the employees’ tax value, and if the employee has a travel allowance (or a company car) and there is no other discernible reason for the under-withholding of employees’ tax, a ‘20% inclusion’ red flag can be raised.
‘Red flags’ equal ‘SARS audit’.