A recent High Court judgment has highlighted the potential consequences of transferring a business or its assets while significant tax liabilities remain unresolved. The case is relevant to companies considering restructures, business sales, related-party transfers or the closure of an entity with outstanding SARS exposure.

In CSARS v Africa Cash and Carry (Crown Mines) (Pty) Ltd and Another, the court considered whether a newer company could be held jointly and severally liable for the tax debts of an earlier company after business assets were transferred between them. The judgment was handed down on 2 October 2026 and is listed by SARS under the Tax Administration Act. Read the SARS-published judgment.

What the judgment considered

The matter involved historic income tax and VAT liabilities, a business transfer for no consideration, and questions about whether the receiving company could be treated as liable for the former company’s tax debt. The court’s summary records that tax debts prescribe after 15 years under section 171 of the Tax Administration Act, rather than three years under the Prescription Act.

The judgment also considered whether the incorporation of the newer company and the transfer of the business amounted to an abuse of separate juristic personality. These findings were made in the specific circumstances before the court. They should not be treated as a blanket rule that every company in a group automatically becomes liable for another company’s tax debt.

Who should take note

The development is particularly relevant to business owners and finance teams involved in:

  • the sale or purchase of a business as a going concern;
  • transfers of stock, equipment, employees, debtors or accounting systems between related entities;
  • group restructures involving companies with unresolved SARS disputes or payment arrangements; and
  • the winding down of companies with historic income tax or VAT exposure.

Checks businesses should make

Before implementing a restructure or asset transfer, management should reconcile the company’s tax position and identify any assessments, objections, appeals, payment suspensions, compromise discussions or preservation orders. The accounting records should clearly document the commercial purpose, valuation, consideration paid and approvals supporting the transaction.

Businesses should also review whether the proposed transaction could affect SARS’s ability to recover tax, particularly where assets are transferred to a connected party. A review should include the general ledger, VAT reconciliations, income tax assessments, correspondence with SARS, board or shareholder resolutions and agreements between related entities.

Practical next steps

Do not assume that an old tax liability has disappeared simply because several years have passed. Obtain an up-to-date statement of account, investigate unresolved historic balances and ask a suitably qualified tax adviser to assess the consequences before moving assets or operations.

For SMEs, strong bookkeeping and properly documented related-party transactions can make it easier to distinguish a legitimate commercial restructure from a transaction that may attract scrutiny. Businesses needing support with accounting records, tax compliance or financial administration can explore Your Financial Partner’s services.