A recent High Court decision should serve as a cautionary tale for any taxpayer who underestimates the procedural rigor required when challenging the South African Revenue Service (“SARS”). In Kerbyn Cape 2 (Pty) Ltd v CSARS (15899/2023) [2025] ZAWHC 11, the court dismissed the taxpayer’s application on procedural grounds alone, and ordered it to pay SARS’ legal costs.

This case highlights a simple but costly truth: even a strong tax position can be lost if a taxpayer follows the incorrect procedure when disputing an assessment or decision taken by SARS. Legal representation from the outset is no longer a luxury but a necessity.

The wrong door, at the wrong time

The taxpayer approached the High Court directly, seeking to correct an assessment in which the central issue was the classification of a sale of immovable property. SARS raised two points in limine: lack of jurisdiction and the taxpayer’s failure to exhaust internal remedies under the Tax Administration Act.

The High Court agreed with SARS on both counts.

First, the court emphasised that the appropriate forum for such a dispute is the Tax Court, not the High Court. In terms of section 105 of the Tax Administration Act, No. 28 of 2011 (“TAA”) a taxpayer must apply to SARS for permission to approach the High Court, a step the taxpayer failed to take. The court also noted the fact that the Supreme Court of Appeal had reinforced that section 105 is intended to ensure that internal remedies such as the objection and appeal process are exhausted before approaching a Tax Board, Tax Court or higher court. 

Second, the court found that the taxpayer had not exhausted the internal remedies available to it. Specifically, it had not objected to SARS’ decision, nor had it followed the prescribed dispute resolution steps. The court noted that the taxpayer had “simply bypassed” the process, a move that proved fatal to its case.

Taxpayers pay the price for missteps

The outcome was swift and unforgiving: SARS’ points in limine succeeded, the review application was dismissed, and the taxpayer was ordered to pay SARS’ costs. The court specifically noted that the taxpayer appeared to be the author of its own misfortune. There was no consideration of whether SARS had erred substantively. The taxpayer’s legal challenge collapsed entirely on procedural grounds.

This is not just a technical lesson. It is a financial one. Cost orders in tax litigation can be substantial, and when a taxpayer jumps the gun or is led down the wrong path, the consequences can be both painful and avoidable.

Expert guidance, from the start

This judgment reinforces why taxpayers should seek qualified legal advice before initiating any dispute with SARS. The tax litigation landscape is increasingly complex, and SARS is quick to identify and rely on procedural missteps, often as a first line of defence.

Given SARS’ high success rate in litigation, procedural compliance is just as critical as the substantive tax position. As this case demonstrates, even a compelling grievance against SARS will fail if it is brought in the wrong forum or pursued through the wrong procedure.

In tax disputes, timing, process, and forum are everything. One misstep can cost millions — and leave a taxpayer footing the bill for SARS’ legal team.

Written by André Daniels, Head of Tax Controversy & Dispute Resolution at Tax Consulting SA