(c) South Africa Institute of Chartered Accountants. Contact SAICA for permission to reproduce this article., Tax

The tax practitioner’s lien for outstanding debt

By Madelein Grobler

Tax practitioners are required by law to provide their clients with access to their own individual eFiling profiles, and refusing to do so will not only have ethical consequences but also legal consequences

As the 2019 tax year comes to an end on 28 February 2019, taxpayers may be scouting for a new tax practitioner to do their tax affairs in future. However, the cost of being tax compliant may result in fee disputes, especially if there are unforeseen costs for the tax practitioner like queuing for four hours or resubmitting volumes of documents. Furthermore, the current economic downturn has resulted in late and non-payments rising substantially. Late payments to SMEs are at an all-time high[1] and debt defaults applying to 45% of the 25 million active credit consumers.[2]

Tax practitioners are not exempt from this challenge and it is not always easy to address it.

Withholding of taxpayer profiles for debt

With the advent of SARS eFiling with taxpayer and tax practitioner profiles, one of the practices used by some tax practitioners to ensure payment for their services was to withhold filing of online returns and the actual taxpayer profile until payment was made. Taxpayers are after all a lot warier of SARS debt enforcement than of normal debt collectors.

This practice was quickly frowned upon by SARS, which subsequently introduced functionality for taxpayers to remove tax practitioners.[3] SARS also issued clarification in the 2015 Tax Practitioner Connect[4] confirming that this practice is not allowed and may also constitute a criminal offence.

SAICA has taken a similar view that such actions constitute minimum unprofessional conduct as it obstructs the taxpayer from complying with the law and SAICA has in fact have issued sanction against a member for such unprofessional conduct.

So, does that mean that tax practitioners have no rights to collect what is legally due, especially when it comes to electronic documents and services such as eFiling?

Tax practitioners’ rights

The collection of debt is a legal issue and the tax practitioner would need to follow the remedies available to him/her, for example debtors/creditors lien (right of retention) and debt collection. The tax practitioner’s letter of engagement and terms and conditions the client agrees to will set the legal basis and remedies available to the tax practitioner upon the client’s default to pay an outstanding account.

So, if the tax practitioner may not withhold the eFiling profile, what other information, client documents, working papers and/or working product may he/she withhold until due payment is made?

In this regard we refer to a contractual lien. A contractual lien secures the creditor’s contractual claim against a debtor through the retention of documents in the position of the creditor until such time that payment is received.

In Botha NO v EM Mchunu & Co[5] the High Court held in relation to similar professional legal services that:

The test as I see it should simply be that if the attorney is entitled to charge his client a fee in respect of a document in his possession then he should be entitled to exercise a lien over it because then it is recognised that he expended work and labour on it. On that basis documents in his possession which were irrelevant to his mandate even though he claims to have expended time and labour on them cannot be retained.

Given the above principle, a tax practitioner’s contractual lien would attach to the working papers formulated in support of the tax practitioner’s opinion or conclusion, as well as to the working product. It also seems that the tax practitioner’s contractual lien extends to the client’s original documents, as long as the tax practitioner reviewed such client documents for the purpose of carrying out his/her mandate and provided that such client documentation is important to execute the mandate.  

The IRBA’s Revised Guide for Registered Auditors: Access to Working Papers[6] refers to an auditor’s report on the financial statements as the working product. For tax purposes, a working product will then entail for example a completed tax return, tax opinion, letter of objection, etc. The IRBA Revised Guide also provides a definition as to what constitute working papers for audit purposes. Tax practitioners may apply similar principles to determine what constitute tax working papers, while applying their professional judgement.

Even though a tax practitioner may have a contractual lien over more than those documents that the tax practitioner actually prepared, the Court still has the discretion to order delivery thereof to the taxpayer upon the provision of adequate security. In The Law Society of Cape of Good Hope v A Dippenaar[7] the Court noted that one of the factors to be considered to override a lien would be where a professional is guilty of grave professional misconduct.

Where a tax practitioner wishes to exercise his/her contractual lien, such specific remedy needs to be incorporated into the letter of engagement and terms and conditions as a remedy.


Tax practitioners cannot refuse to transfer a client’s tax profile (that is, eFiling). Despite the difficult economic times and measures to collect outstanding debt, such action will not only have ethical consequences but also legal consequences. Tax practitioners are required by law to provide their clients with access to their own individual eFiling profiles.

However, tax practitioners can collect outstanding debt through the legal system or exercise their contractual lien as provided for in the letter of engagement over all work products and even taxpayer documents. The legality of such enforceable rights may therefore not be in question, but whether it is professional and ethical may be disputed by others.

This article was originally published in the April 2019 issue of ASA.


[1] https://www.timeslive.co.za/sebenza-live/features/2018-04-27-late-payments-to-smes-at-an-all-time-high/.

[2] https://businesstech.co.za/news/business/267201/this-graph-shows-a-concerning-rise-in-debt-default-in-south-africa-as-people-buckle-under-tough-economy/.

[3] See process for removal as explained by TaxTim, https://www.taxtim.com/za/tax-guides/how-to-get-back-control-of-your-sars-efiling-profile.

[4] http://www.sars.gov.za/ClientSegments/Businesses/Pages/Tax-Practitioners-Connect-Issue-2.aspx.

[5] Botha NO v EM Mchunu & Co 1992 (4) SA 740 (N) held (and cited with approval in Free State Agriculture & Eco Tourism Development v Mthembu and Mohamed 2002 (5) SA 343(O)).

[6] https://www.irba.co.za/upload/Revised%20Guide%20for%20RAs-Access%20to%20Working%20Papers%20final%20for%20issue.pdf.

[7] The Law Society of Cape of Good Hope v A Dippenaar (2006) JOL 18551 (C).