Courier vehicle SendIT Limited sold a courier vehicle to Mr. Adams, a natural person and not related to the company, at an open market value of R350 000 (including VAT) on 1 December 2021. The sale was made in terms of an instalment sale agreement. No deposit was paid, but he is liable for instalments of R18 000 per month (including VAT), which is payable from 1 January 2022. SendIT Limited acquired this courier vehicle for R869 000 (including VAT) from an unrelated VAT vendor on 1 March 2018. This cou-rier vehicle was brought into use immediately. Courier vehicles are written off over four years for tax purposes. However, at the beginning of February 2022, Mr. Adams called SendIT Limited and complained about a serious problem being experienced with the courier vehicle. He was furious and threatened to report the matter to a newspaper. SendIT Limited agreed to cancel the agreement, effective 15 February 2022, to avoid bad publicity. Mr. Adams returned the courier vehicle and was fully refunded for the two instalments he had already paid, and all further instalments were cancelled. At the time of cancelation of the agreement, the courier vehicle was valued at R260 000. The courier vehicle was not used by SendIT Limited or repaired since Mr. Adams returned it. Mr. Adams is not registered for VAT.

REQUIRED:

1.1 With reference to the Courier vehicle, calculate the normal tax consequences of SendIT Limited for the 2022 year of assessment, relating to the sale of the courier vehicle. (7 marks)

1.2 With reference to the Courier vehicle, discuss ALL the tax consequences in respect of the courier vehicle returned and cancellation of the instalment sale agreement on 15 February 2022. (8 marks)