Michael Weare v The Commissioner for South African Revenue Service

The appellant, a registered VAT vendor carrying on business as a bookmaker, overpaid VAT between September 1991 and July 1996 in the total amount of approximately R1.43 million. The overpayment arose because he, in line with prevailing industry practice and the VAT Guide 404, treated winnings received from so-called 'take-back' or 'cover' bets placed with other bookmakers as subject to output tax. At the time, the VAT Act 89 of 1991 did not expressly require such winnings to be included as output tax; this lacuna was later cured by the insertion of s 8(13A) in 1996. Upon discovering the error, the appellant claimed a refund. SARS accepted that a refund was due but limited it to amounts overpaid in the preceding six months on the basis that the overpayments were made in accordance with a practice generally prevailing, as contemplated in s 44(3). The appellant contended that the refund was instead claimable under s 44(1), which would allow recovery over a five-year period.

The appeal was dismissed with costs, including the costs of two counsel. The refund remained limited to amounts overpaid in the six months preceding the claim.

The case clarifies the distinction in VAT law between refunds arising from excess input tax under s 16(5) and refunds arising from overpayments under s 44(2). It affirms that the substance of a VAT calculation prevails over the method used and underscores the importance of the 'practice generally prevailing' proviso in limiting retrospective VAT refunds. The judgment is significant for VAT vendors and for the interpretation of refund provisions in South African tax law.