SA Revenue Service loses VAT refund case against retail firm

Court rules returns cannot be used to settle former debt

- By Boitumelo Kgobotlo

The South African Revenue Service (Sars) has lost a case against retail company Henque 3935cc, trading as PQ Clothing Outlet, in a long-running battle over tax refunds worth over R1-million.

The Supreme Court of Appeal ruled that Sars was not entitled to use value-added tax (VAT) refunds owed to the company to settle older tax debts, as those debts were incurred before the company entered business rescue.

According to information submitted before the court, Henque operated around 40 clothing and beauty product stores nationwide. In early 2018, the company faced financial trouble and entered business rescue in January 2018.

Before the company went into business rescue, it submitted its tax return for the 2017 financial year, declaring a loss of R46000. Based on this, no tax was due.

However, Sars informed Henque that it would audit the return.