As a result, the amount should be fully deducted [see vi The warehouse is not a manufacturing building and does not qualify for the manufacturing building The warehouse also predates the
Trang 1Answers
Trang 2Fundamentals Level – Skills Module, Paper F6 (ZAF) June 2011 Answers
Note: The ACCA does not require candidates to quote section numbers or other statutory or case references as part of their answers Where such references are shown below [in square brackets] they are given for information purposes only
Marks
1 Mrs Mokomele
(a) Employees tax calculation
Employer contributions to medical aid (all taxable)
Clothing allowance – not exempt [per s.10(1)(nA)] as not distinguishable
Bursary for son – fully taxable as Mrs Mokomele earns remuneration of
Subsistence amounts
No record of actual expenditure – use Government regulation rate –
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495,400 Contribution to pension fund:
R1,750 or 7·5% x R400,000 (being retirement funding employment
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465,400 Contribution to retirement annuity fund:
R1,750; or R3,500 – R30,000 (negative therefore not applicable) 15% x R465,400 – R400,000 + R30,000 (being 15%
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(b) 31 August 2010
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Trang 3As the RAF deduction will have to be redetermined, begin with the taxable
Subtract the travel allowance inclusion (as this must be redetermined) (48,000) ½
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417,400
Lessbusiness travel
Fixed cost per kilometre (in cents)
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Reduction: Business kms (5,000) x cost per km (R6·317) (31,585) 28,415 1
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445,815 Investment income
Dividend from CIS within 12 months of receipt by CIS: CIS treated as a conduit 10,000 1
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Distribution from CIS outside of 12 months since receipt by CIS 30,000 1
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Rental trade
Loss from Property B ring-fenced and may not be used here if taxable income
finally determined remains over the threshold at which tax is levied at the
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548,515 Contribution to retirement annuity fund:
Actual – R4,000 x 12 = R48,000 limited to greater of:
R1,750; or
R3,500 – R30,000 (negative therefore not applicable)
15% x R548,515 – R400,000 + R30,000 (being 15% of
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521,738 Capital gains tax:
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Lessannual exclusion (as no other capital gains or capital losses for
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613,613 The taxable income figure confirms that the loss from Property B may not be used ½
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An assessed loss for Property B will be carried forward amounting to (R13,000 + R8,000) 21,000 ½
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Trang 42 Blend Co (Pty) Ltd
(a) As Blend Co (Pty) Ltd is not held by natural person shareholders, it cannot be a small business corporation (as
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(b) Income tax effects
(i) Machine A
Manufacturing machine allowance [s.12C]
Recoupment [s.8(4)(a)]
LessTax Value: R500,000 – R200,000 (40%: 2008) – R100,000 (20%: 2009) – R100,000 (20%: 2010) – R100,000 (above) 0 40,000 1
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Capital gain or capital loss:
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Lessbase cost:
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(ii) Machine B:
Purchase price of machine from Test Limited to connected person rule [s.23J]: 250,000 ½
Lessallowances claimed by connected person
Addrecoupment for connected person
LessTax Value: R400,000 – R240,000 = R160,000 (160,000) 15,000 ½
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Addcapital gain multiplied by inclusion rate of 50%
Less:Expenditure (R400,000) less allowances (R240,000) (160,000) 0 ½
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Manufacturing machinery allowance [s.12C]
(iii) Lease and lease improvement
Leasehold improvement – deduction is limited to value stipulated in the
lease spread over the remaining lease term or 25 years (whichever the lesser)
Excess cost above R1,500,000 was incurred for a manufacturing building
Lessee entitled to claim manufacturing building allowance on such excess
Manufacturing building allowance – 5% x (R2,000,000 – R1,500,000) (25,000) 1 Manufacturing allowance for Machine D [s.12C]
Moving costs of Machine D – spread over remaining tax life of the asset
moved [s.12C(6)]
(v) The finger loss is in the nature of risks closely aligned with the type of business
that Blend conducts As a result, the amount should be fully deducted [see
(vi) The warehouse is not a manufacturing building and does not qualify for the manufacturing building
The warehouse also predates the commercial building allowance No allowance was therefore claimed on
Trang 5Marks Tutorial note: No election can be made to defer the capital gain As a voluntary disposal of a building and
a building that was not a depreciable asset, the qualifying criteria are not met.
Capital gain:
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The new warehouse qualifies for the commercial building allowance
[s.13quin] at a rate of 5% per annum
Capital gains inclusion:
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(c) The deduction of the audit fees by Tea Co Holdings Ltd requires the audit expense to be:
Expenditure incurred in the production of exempt income is not permitted as a deduction [s.23(f)] ½
It is understood from the scenario that the audit fees relate to the company and its income as a whole ½ Dividends from the South African companies are exempt from gross income and therefore not income as
This implies that the audit fees should not be fully permitted as a deduction as some of the fee charged relates
The audit fees also relate to the preparation of consolidated financial statements and not exclusively to the
generation of income However, such consolidated financial statements may be used to obtain credit from
Apportionment on the basis of income earned may therefore not be appropriate An appropriate apportionment
must be determined examining all the facts and on a balance of probabilities basis It is clear, however, that the
full audit fee is not deductible as some of the fee relates to the audit of the exempt income stream (dividends) 1
Tutorial note: Further information may be found in ITC 1842 72 SATC 118 which discusses the usual principles
pertaining to the deductibility of an expense.
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3 (a) Holiday Home
No disposal at date of emigration as property is immovable property in South Africa ½
Furniture and fittings
As movable assets, these are deemed to be disposed of on emigration, being 30 June 2010 1 Subsequent disposal when Mrs Mpotulo is in Australia is irrelevant for South African capital gains tax 1 Motor car
Movable asset would result in a deemed disposal on emigration, 30 June 2010 ½ Kruger rands
Disposal was before emigration – date of sale is the date of disposal, being 1 May 2010 ½
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Trang 6(b) Holiday Home
LessBase Cost:
Valuation date value:
(i) 20% x (Proceeds – post 1 Oct 2001 expenditure) =
(iii) Time apportioned base cost:
P = R x B/(A + B)
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Post 1 October 2001 expenditure:
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Furniture and fittings
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Motor car
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Kruger rands
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2,546,500
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4 (a) 1 Where the total value of taxable supplies exceeds R1 million over a 12-month period, the person becomes
liable to register for value added tax (VAT) at the end of the month in which the turnover exceeds
Within 21 days from the month end in which the person becomes liable, an application must be made for
2 The taxable supplies considered for the registration threshold stipulated in (1) above does not include the
Trang 7The sale by Dr Daniels of the furniture, while still a taxable supply, is not considered for the purposes of
If his other taxable supplies made regularly and continuously in the course or furtherance of his enterprise
remains below R1 million, he does not have to apply for registration as a vendor 1
3 A full VAT invoice must include the following:
– Name, address and, where the patient is a VAT vendor, the VAT number of such patient ½ – A serialised invoice number and the date of issue of the invoice ½
– Either:
– The value of the supply, the amount of tax charged and the consideration for the supply; or 1 – The total consideration value and either the amount of tax charged or the rate at which the tax
4 Bad debts generate a VAT input claim Effectively the output VAT charged is reversed in the VAT period in
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(b) The supply by the website company of the electronic books is an imported service [as defined in s.1 of the VAT
Act], being a supply by a non-resident to a resident who will use the supply other than for purposes of making
taxable supplies As Dr Daniels is using the books for recreational purposes, this purchase meets the definition 2 The time of supply for such imported service is the earlier of issuance of an invoice or when payment is made
Since the foreign company does not issue invoices the time of supply must therefore be the date of payment,
The value is the open market value or actual consideration, whichever is greater The only value supplied is that
The transaction must be declared by Dr Daniels to the Commissioner in the prescribed form within 30 days of
the time of supply (15 May 2011) Dr Daniels will have to pay VAT on the imported service of 14% x R2,310
Tutorial Note:
The definition of days is derived from the Interpretation Act and is reckoned by including the first day (i.e
15 May 2011) and excluding Saturdays, Sundays and public holidays For this reason the exact date is not
expected in the solution (but for reference would be 27 June 2011).
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5 Max Green
(a) The service is mainly to residential customers (who themselves are not VAT vendors) ½
By registering as a VAT vendor, Max will have to charge VAT on his services, increasing the costs to his
non-VAT vendor customers while producing no further revenue for himself Stated differently, Max may have to
charge more than the competition in this industry who are not registered for VAT ½ Much of the cost in Max’s business is likely to be labour in the collection and sorting of the recycling collected
As the payment of wages does not result in a VAT input claim, there is no advantage to Max to register the
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(b) As Max is under 65 years of age and earning income other than remuneration (such as his salary) he is a
Tutorial note:
As he is ‘carrying on a business’ he does not qualify for the passive taxable income exemption from provisional
tax, which provides that persons under 65 not carrying on a business may have other taxable income from
interest, dividends or rental but not exceeding R20,000 to avoid registration as a provisional taxpayer.
Trang 8Persons qualifying as provisional taxpayers must apply for registration within 30 days of becoming a provisional
Max became a provisional taxpayer on 15 April 2010 when he began earning income from carrying on a
He therefore must register as a provisional taxpayer within 30 days after 15 April 2010 ½ Tutorial Note:
The definition of days is derived from the Interpretation Act and is reckoned by including the first day (i.e
15 April 2010) and excluding Saturdays, Sundays and public holidays For this reason the exact date by which
Max must register is not expected in the solution (but for reference would be 28 May 2010).
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