QUESTION 3 (20 marks, 36 minutes) QUESTION 3 (continued) This question comprises two independent parts, namely Part A and Par B 5 Part A (16 marks, 29 minutes) 6 Makhulu (Pty) Ltd (Makhulu) is a business that specialises in the manufacturing and distnbution of steel pipes throughout Southern Africa Makhulu is a registered VAT vendor Makhulu has obtained valid tax invoices, as well as all the required documentation, for all of the transactions mentioned below The com- pany makes only taxable supplies Makhulu paid rent for premises used as storage space for the steel pipes and for office space for the head office in total of R232 500 (excluding VAT) for the two months ended 28 February 2019 On 23 January 2019, Makhulu entered into an instalment credit agreement to finance the purchase of a single cab delivery vehicle to be exclusively used by the sales manager to visit company clients from 1 February 2019 in terms of the agreement, Makhulu will pay R16 500 per month for 36 months for the single cab delivery vehicle in total starting from 1 February 2019 The total of the interest component included in the instalments over the 36 months is R131 582 The sales manager was also allowed to use the vehicle for private purposes The following information relates to the two-month tax period ending 28 February 2019 (all amounts include VAT where applicable, unless specifically stated otherwise) REQUIRED MARKS Description Note R Calculate the VAT payable by or refundable to Makhulu (Pty) Ltd for the two-month tax period ending 28 February 2019 Show all calculations and provide reasons for not claim- ing input tax or not accounting for output tax 16 1 Income Purchases Steel pipes Office furniture 2 3 3 515 000 (1 875 000 (116 000) (411 035) (232 500) (14 375) Part B (4 marks, 7 minutes) Other expenses 4 Rental expense 5 Cleaning services Instalment credit agreement Notes ConnerShop (Pty) Ltd is a convenience shop situated at a holiday resort ConnerShop (Pty) Ltd purchased a new delivery vehicle for R517 500 (including VAT) on 1 April 2018 Only 80% of the business relates to taxable supples and the delivery vehicle is used for the making of taxable and exempt supplies The company's financial year ends on the last day of April 6 7 1 At the end of the 2018 financial year it was established that 80% of the business still relates to taxable supplies input tax of R54 000 was correctly claimed in the 2018 year of assessment for the delivery vehicle purchased on 1 Apni 2018 At the end of the 2019 year of assessment (Year two), the company determined that 55% of the business relates to taxable supplies The market value of the delivery vehicle on that date was R510 000 (including VAT) At the end of the 2020 year of assessment (Year three), the company determined that 70% of the business relates to taxable supplies The market value of the delivery vehicle on that date was R520 000 (including VAT) 2 3 REQUIRED MARKS Income compnsed of the following On 25 February 2019 new steel pipes were directly exported to a client in Namibia for R560 000 Local sales of newly manufactured steel pipes amounted to R2 955 000 On 15 February 2019 Makhulu purchased steel on credit from a suppler (a registered VAT vendor) based in Vanderbilpark, South Africa, costing R1 875 000 (excluding VAT) Only R1 200 000 was paid by 28 February 2019 and the balance was paid on 24 March 2019 On 12 December 2018 Makhulu purchased second-hand office furniture from a non-vendor in Cape Town for R116 000 The market value of the office furniture was R120 000 on the date of purchase The office furniture will be used in the making of taxable supplies An amount of R75 000 was paid on the date of purchase and the balance of R41000 was paid on 21 January 2019 The following expenditure relates to other expenses for the two-month tax penod ending on 28 February 2019 The three sales managers have company credit cards to enable them to take out clents in order to solicit new business and build chent relationships These costs amounted to R37 285 for the two months Makhulu has a fleet of fifteen delivery trucks The diesel for the delivery trucks for the two months amounted to R287 500 Makhulu launched an advertising campaign to market a new range of steel pipes AAA Branding (Pty) Ltd was paid an amount of R86 250 on 20 February 2019 to run a three-month advertising campaign 4 Calculate the VAT consequences for Conner Shop (Pty) Ltd in respect of the change in use of the delivery vehicle for each year of assessment from 2018 to 2020 4 TAX3701 May / June 2019 QUESTION (20 marks, 36 minutes) This question comprises two independent parts, namely Part A and Par B Part A (16 marks, 29 minutes) Makhulu (Pty) Lid (Makhulu) is a business that specialises in the manufacturing and distrbution of steel pipes throughout Southern Africa Makhulu is a registered VAT vendor Makhul has obtained valid tax invoices, as well as all the required documentation for all of the transachons mentioned below The com pany makes only taxable supplies The following information relates to the two-month tax period ending 28 February 2019 (all amounts include VAT where applicable, unless specifically stated otherwise) 7 TAX3701 May / June 2019 QUESTION 3 (continued) 5 Makhulu paid rent for promises used as storage space for the steel pipes and for office space for the head office in total of 232 500 (excluding VAT) for the two months ended 28 February 2019 6 On 23 January 2019, Makhulu entered into an instalment credit agreement to finance the purchase of a single cab delivery vehicle to be exclusively used by the sales manager to visit company clients from 1 February 2019 in terms of the agreement, Makhulu will pay R16 500 per month for 36 months for the single cab delivery vehicle in total starting from 1 February 2019 The total of the interest component included in the instaliments over the 36 months R131 582 The sales manager was also allowed to use the vehicle for private purposes MARKS REQUIRED Calculate the VAT payable by or refundable to Makhulu (Pty) Lid for the two month tax penod ending 28 February 2019 Show all calculations and provide reasons for not claim ing out tax or not accounting for output tax 16 1 3 4 Description Note R Income 3 515 000 Purchases Steel pipes 2 (1 875 000) Office furniture (116 000) Other expenses (411035) Rental expense 5 (232 500) Cleaning services (14 375) Instalment credit agreement ? Notes Income compnsed of the following . On 25 February 2019 new steel pipes were directly exported to a clent in Namibia for R$60 000 Local sales of newly manufactured steel pipes amounted to R2 955 000 2 On 15 February 2019 Makhulu purchased steel on credit from a supplier (a registered VAT vendor) based in Vanderbepark South Afca, costing R1 875 000 (excluding VAT) Only R1 200 000 was paid by 28 February 2019 and the balance was paid on 24 March 2019 On 12 December 2018 Makhulu purchased second-hand office furniture from a non-vendor in Cape Town for R116000 The market value of the office furniture was R120 000 on the date of purchase The office furniture will be used in the making of taxable supplies An amount of R75 000 was pad on the date of purchase and the balance of R41 000 was pard on 21 January 2019 The following expenditure relates to other expenses for the two-month tax period ending on 28 February 2019 The three sales managers have company credit cards to enable them to take out clients in order to solicit new business and build chent relationships These costs amounted to R37 285 for the two months Makhulu has a fleet of fifteen delivery trucks The diesel for the delivery trucks for the two months amounted to R287 500 Makhulu launched an advertising campaign to market a new range of steel pipes AMA Branding (Pty) Ltd was paid an amount of R6 250 on 20 February 2019 to run a three-month advertising campaign [TURN OVER] Part (4 marks, 7 minutes) ConnerShop (Pty) Lid is a convenience shop stuated at a holday resort ConnerShop (Pty) Ltd purchased a new delivery vehicle for R517 500 (including VAT) on 1 April 2018 Only 80% of the business relates to taxable supples and the delivery vehicle is used for the making of taxable and exempt supplies The company's financial year ends on the last day of April At the end of the 2018 fnancial year it was established that 80% of the business still relates to taccable supples Input tax of RS4000 was correctly claimed in the 2018 year of assessment for the delivery vehicle purchased on 1 April 2018 At the end of the 2019 year of assessment (Year two), the company determined that 55% of the business relates to taxable supples The market value of the delivery vehide on that date was R$10 000 (including VAT) At the end of the 2020 year of assessment (Year three), the company determined that 70% of the business relates to taxable supplies The market value of the delivery vehicle on that date was RS20 000 (including VAT) 3 REQUIRED MARKS Calculate the VAT consequences for ConnerShop (Pty) Ltd in respect of the change in use of the delivery vehicle for each year of assessment from 2018 to 2020 4 [TURN OVERI QUESTION 3 (20 marks, 36 minutes) QUESTION 3 (continued) This question comprises two independent parts, namely Part A and Par B 5 Part A (16 marks, 29 minutes) 6 Makhulu (Pty) Ltd (Makhulu) is a business that specialises in the manufacturing and distnbution of steel pipes throughout Southern Africa Makhulu is a registered VAT vendor Makhulu has obtained valid tax invoices, as well as all the required documentation, for all of the transactions mentioned below The com- pany makes only taxable supplies Makhulu paid rent for premises used as storage space for the steel pipes and for office space for the head office in total of R232 500 (excluding VAT) for the two months ended 28 February 2019 On 23 January 2019, Makhulu entered into an instalment credit agreement to finance the purchase of a single cab delivery vehicle to be exclusively used by the sales manager to visit company clients from 1 February 2019 in terms of the agreement, Makhulu will pay R16 500 per month for 36 months for the single cab delivery vehicle in total starting from 1 February 2019 The total of the interest component included in the instalments over the 36 months is R131 582 The sales manager was also allowed to use the vehicle for private purposes The following information relates to the two-month tax period ending 28 February 2019 (all amounts include VAT where applicable, unless specifically stated otherwise) REQUIRED MARKS Description Note R Calculate the VAT payable by or refundable to Makhulu (Pty) Ltd for the two-month tax period ending 28 February 2019 Show all calculations and provide reasons for not claim- ing input tax or not accounting for output tax 16 1 Income Purchases Steel pipes Office furniture 2 3 3 515 000 (1 875 000 (116 000) (411 035) (232 500) (14 375) Part B (4 marks, 7 minutes) Other expenses 4 Rental expense 5 Cleaning services Instalment credit agreement Notes ConnerShop (Pty) Ltd is a convenience shop situated at a holiday resort ConnerShop (Pty) Ltd purchased a new delivery vehicle for R517 500 (including VAT) on 1 April 2018 Only 80% of the business relates to taxable supples and the delivery vehicle is used for the making of taxable and exempt supplies The company's financial year ends on the last day of April 6 7 1 At the end of the 2018 financial year it was established that 80% of the business still relates to taxable supplies input tax of R54 000 was correctly claimed in the 2018 year of assessment for the delivery vehicle purchased on 1 Apni 2018 At the end of the 2019 year of assessment (Year two), the company determined that 55% of the business relates to taxable supplies The market value of the delivery vehicle on that date was R510 000 (including VAT) At the end of the 2020 year of assessment (Year three), the company determined that 70% of the business relates to taxable supplies The market value of the delivery vehicle on that date was R520 000 (including VAT) 2 3 REQUIRED MARKS Income compnsed of the following On 25 February 2019 new steel pipes were directly exported to a client in Namibia for R560 000 Local sales of newly manufactured steel pipes amounted to R2 955 000 On 15 February 2019 Makhulu purchased steel on credit from a suppler (a registered VAT vendor) based in Vanderbilpark, South Africa, costing R1 875 000 (excluding VAT) Only R1 200 000 was paid by 28 February 2019 and the balance was paid on 24 March 2019 On 12 December 2018 Makhulu purchased second-hand office furniture from a non-vendor in Cape Town for R116 000 The market value of the office furniture was R120 000 on the date of purchase The office furniture will be used in the making of taxable supplies An amount of R75 000 was paid on the date of purchase and the balance of R41000 was paid on 21 January 2019 The following expenditure relates to other expenses for the two-month tax penod ending on 28 February 2019 The three sales managers have company credit cards to enable them to take out clents in order to solicit new business and build chent relationships These costs amounted to R37 285 for the two months Makhulu has a fleet of fifteen delivery trucks The diesel for the delivery trucks for the two months amounted to R287 500 Makhulu launched an advertising campaign to market a new range of steel pipes AAA Branding (Pty) Ltd was paid an amount of R86 250 on 20 February 2019 to run a three-month advertising campaign 4 Calculate the VAT consequences for Conner Shop (Pty) Ltd in respect of the change in use of the delivery vehicle for each year of assessment from 2018 to 2020 4 TAX3701 May / June 2019 QUESTION (20 marks, 36 minutes) This question comprises two independent parts, namely Part A and Par B Part A (16 marks, 29 minutes) Makhulu (Pty) Lid (Makhulu) is a business that specialises in the manufacturing and distrbution of steel pipes throughout Southern Africa Makhulu is a registered VAT vendor Makhul has obtained valid tax invoices, as well as all the required documentation for all of the transachons mentioned below The com pany makes only taxable supplies The following information relates to the two-month tax period ending 28 February 2019 (all amounts include VAT where applicable, unless specifically stated otherwise) 7 TAX3701 May / June 2019 QUESTION 3 (continued) 5 Makhulu paid rent for promises used as storage space for the steel pipes and for office space for the head office in total of 232 500 (excluding VAT) for the two months ended 28 February 2019 6 On 23 January 2019, Makhulu entered into an instalment credit agreement to finance the purchase of a single cab delivery vehicle to be exclusively used by the sales manager to visit company clients from 1 February 2019 in terms of the agreement, Makhulu will pay R16 500 per month for 36 months for the single cab delivery vehicle in total starting from 1 February 2019 The total of the interest component included in the instaliments over the 36 months R131 582 The sales manager was also allowed to use the vehicle for private purposes MARKS REQUIRED Calculate the VAT payable by or refundable to Makhulu (Pty) Lid for the two month tax penod ending 28 February 2019 Show all calculations and provide reasons for not claim ing out tax or not accounting for output tax 16 1 3 4 Description Note R Income 3 515 000 Purchases Steel pipes 2 (1 875 000) Office furniture (116 000) Other expenses (411035) Rental expense 5 (232 500) Cleaning services (14 375) Instalment credit agreement ? Notes Income compnsed of the following . On 25 February 2019 new steel pipes were directly exported to a clent in Namibia for R$60 000 Local sales of newly manufactured steel pipes amounted to R2 955 000 2 On 15 February 2019 Makhulu purchased steel on credit from a supplier (a registered VAT vendor) based in Vanderbepark South Afca, costing R1 875 000 (excluding VAT) Only R1 200 000 was paid by 28 February 2019 and the balance was paid on 24 March 2019 On 12 December 2018 Makhulu purchased second-hand office furniture from a non-vendor in Cape Town for R116000 The market value of the office furniture was R120 000 on the date of purchase The office furniture will be used in the making of taxable supplies An amount of R75 000 was pad on the date of purchase and the balance of R41 000 was pard on 21 January 2019 The following expenditure relates to other expenses for the two-month tax period ending on 28 February 2019 The three sales managers have company credit cards to enable them to take out clients in order to solicit new business and build chent relationships These costs amounted to R37 285 for the two months Makhulu has a fleet of fifteen delivery trucks The diesel for the delivery trucks for the two months amounted to R287 500 Makhulu launched an advertising campaign to market a new range of steel pipes AMA Branding (Pty) Ltd was paid an amount of R6 250 on 20 February 2019 to run a three-month advertising campaign [TURN OVER] Part (4 marks, 7 minutes) ConnerShop (Pty) Lid is a convenience shop stuated at a holday resort ConnerShop (Pty) Ltd purchased a new delivery vehicle for R517 500 (including VAT) on 1 April 2018 Only 80% of the business relates to taxable supples and the delivery vehicle is used for the making of taxable and exempt supplies The company's financial year ends on the last day of April At the end of the 2018 fnancial year it was established that 80% of the business still relates to taccable supples Input tax of RS4000 was correctly claimed in the 2018 year of assessment for the delivery vehicle purchased on 1 April 2018 At the end of the 2019 year of assessment (Year two), the company determined that 55% of the business relates to taxable supples The market value of the delivery vehide on that date was R$10 000 (including VAT) At the end of the 2020 year of assessment (Year three), the company determined that 70% of the business relates to taxable supplies The market value of the delivery vehicle on that date was RS20 000 (including VAT) 3 REQUIRED MARKS Calculate the VAT consequences for ConnerShop (Pty) Ltd in respect of the change in use of the delivery vehicle for each year of assessment from 2018 to 2020 4 [TURN OVERI