High Court Orders SARS to Honour Its Own Tax Deal
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Inhlakanipho Consultants (Pty) Ltd v CSARS (A333/2024)
What Was the Case About?
Inhlakanipho Consultants (the taxpayer) and SARS signed a legally binding tax settlement agreement in 2018. The dispute was about VAT assessments and penalties for two tax periods (2010 and 2014). After years of back-and-forth (including objections and a tax court appeal), the parties agreed:
The taxpayer would pay a total of R5.9 million.
SARS would revise the assessments.
Interest would be calculated after the payment was made.
This would be the final and full settlement of all matters for those tax periods.
The agreement was clear: once payment was made, only interest remained to be calculated using standard methods under the Tax Administration Act (TAA).
The Dispute
After the taxpayer paid the agreed amount, SARS unexpectedly claimed:
The payment was not enough.
According to it’s internal policies, the payment had to be allocated first to interest and penalties, not to the principal tax debt.
Therefore, more money was still owed.
SARS relied on section 166 of the TAA, which allows it to decide how payments are allocated, typically oldest debt first, or interest and penalties before principal.
What the Court Found
The Court rejected SARS’s position based on the following facts:
Binding Agreement
The agreement was valid, lawful, and enforceable under section 148 of the TAA.
It clearly set out the exact amount to be paid and what would follow.
SARS was not allowed to change its mind later based on internal system preferences or administrative convenience.
Section 166 Doesn’t Override a Settlement
Section 166 gives SARS discretion in payment allocation, but that doesn’t apply when SARS has specifically agreed otherwise in a written settlement.
The idea that SARS’s computer systems couldn't apply the agreement was not supported by any evidence.
"Inconvenience" ≠ Legal Defence
SARS claimed that it would be “too difficult” to process the payment as agreed because of how its system works.
The Court called this a “plea of inconvenience”, not a legal excuse.
It stressed that government agencies, like SARS, must honour agreements, just like any private party.
The Court Order
The appeal was upheld, and the High Court ordered:
SARS must honour the settlement and treat the taxpayer’s debt as paid in full.
SARS must calculate and share any interest due.
Both parties must meet within 30 business days to resolve any issues with the interest calculation.
SARS must pay the taxpayer’s legal costs, including two counsel.
Why This Case Matters
This judgment is a welcome reminder that:
Taxpayers can rely on SARS to honour formal agreements.
SARS cannot later fall back on internal systems or legal technicalities to undo a settlement.
Courts expect good faith and certainty in dealings with revenue authorities.
The case sets a strong precedent for the enforceability of tax settlements, reinforcing the rule of law in tax administration.
