QUESTION (50 marks) Mrs Baloyi, a producer of various food products, sold trading stock for an amount of R80 000 (excluding value-added tax) to Whole Foods (Pty) Ltd, a chain of food retailing stores. In terms of the sale agreement, the company had to settle 75% of the full purchase price on the date of delivery (1 February) with the balance to be settled three months later (1 May). The sale agreement also stipulated that, should Whole Foods (Pty) Ltd fail to effect payment on 1 May, interest would become payable at 18% per annum, calculated on the outstanding balance with effect from 1 February for as long as the amount remained outstanding. Both parties are resident in the Republic, are registered vendors, and both account for value-added tax on the invoice basis. Whole Foods (Pty) Ltd has a February year end. On 1 May, Whole Foods (Pty) Ltd defaulted by failing to make any payment.

REQUIRED: Discuss the normal tax and value-added tax implications for both parties under the transaction. Motivate your answer and refer to relevant legislation and case law