Hudaco gets off lightly in Sars tax dispute

25 January 2015 - 02:00 By Brendan Peacock
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Component distributor Hudaco has dodged a full R1.9-billion penalty in a tax dispute with SARS and will instead pay only R312-million after a two-year fight over how it financed its BEE scheme.

As a result, Hudaco's share price shot up 16.1% on Friday afternoon.

The dispute arose when Hudaco entered into a BEE transaction in 2007, intending to issue R2.2-billion in subordinated debentures that were supposed to be invested in preference shares of the Cadiz Financial Services Group.

Bravura Equity Services advised Hudaco on the deal. Expert advice was that the deal would not incur tax penalties.

But a SARS investigation evidently revealed that the elaborate deal structure went beyond South African borders and Hudaco's origi-nal instructions, including other entities related to Bravura and Morgan Stanley.

Hudaco's directors maintain they were not aware of the complex structures set up, or the role played by Bravura, and terminated the arrangement in February 2013.

Hudaco has paid R120-million under the "pay now, argue later" rule. The balance of R192-million must be paid by the end of March.

Bravura Solutions executive director Ian Mathews said he had been made aware of the settlement announcement, and would respond depending on legal advice.

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