Question 6 (Marks: 35)

On 31 December 2020, Pete Gregg (60 years) was forced to retire from Starry Jewellers (Pty) Ltd due to ill health. Pete has been working for Starry Jewellers (Pty) Ltd for over 30 years. Upon his retirement Pete was awarded the following:

A gold wristwatch, which cost the company R4 800 to manufacture, in appreciation of his long service to the company. He had never received an award in respect of long service. The normal wholesale price of the watch when it is sold to jewelers is R10 000. These retailers then sell their trading stock of gold watches at a markup of 50% on cost.

His other receipts and accruals during the current year of assessment were as follows: A cash salary of R18 000 a month.

The use of a company car, which cost R246 240 (including VAT). All costs were paid by Starry Jewelers (Pty) Ltd. On his retirement, Pete ceased to have the use of this car.

A tenday holiday at a beach cottage owned by Starry Jewelers(Pty) Ltd. The accommodation islet to nonemployees at a rate of R750 per person per day. Pete and his wife, Tracey, invited their two children who then joined them at the beach cottage for ten days.

Starry Jewelers (Pty) Ltd pays Petes monthly home telephone account. The total amount paid during the year of assessment was R10 050. Pete is required to make business calls from home from time to time.

A loan of R120 000 at an interest rate of 1% a year was granted to him on 1 March 2020. Pete used the loan to purchase a flat. The flat had been let to tenants for the entire year of assessment at a monthly rental of R5 800. On retirement, Pete was required to repay the loan, which he did using the proceeds of a mortgage bond that he had taken out on the property. Interest incurred on the mortgage bond for January and February 2021 amounted to R3 000 in total.

Assume the official rate of interest is 8% for the period 1 March 2020 to 31 July 2020 and 7,75% from 1 August 2020.

Pete earned R10 000 of foreign dividends on his shares in the UK and R24 500 of interest on his South African investments.

Pete paid R2 300 for his first provisional tax payment.

Required:

Q.6.1 Discuss whether Pete Gregg is required to register for provisional tax purposes. (2)

Q.6.2 Calculate Pete Greggs PAYE for the 2021 tax assessment. (If an amount is not to be included in the calculation then reflect this as zero and provide a reason as to why the amount is excluded.) (18)

Q.6.3 Calculate Pete Greggs second provisional tax payment due for the 2021 tax year. (Hint: Start with the Balance of remuneration amount and make the necessary adjustments).

The use of a company car, which cost R246 240 (including VAT). All costs were paid by Starry

A cash salary of R18 000 a month.

On 31 December 2020, Pete Gregg (60 years) was forced to retire from Starry Jewellers (Pty) Ltd

due to ill health. Pete has been working for Starry Jewellers (Pty) Ltd for over 30 years. Upon his retirement Pete was awarded the following:

• A gold wristwatch, which cost the company R4 800 to manufacture, in appreciation of his long service to the company. He had never received an award in respect of long service. The normal wholesale price of the watch when it is sold to jewelers is R10 000. These retailers then sell their trading stock of gold watches at a markup of 50% on cost.

His other receipts and accruals during the current year of assessment were as follows:

(Marks: 35)

Question 6

Starry Jewelers (Pty) Ltd pays Petes monthly home telephone account. The total amount paid during the year of assessment was R10 050. Pete is required to make business calls from home from time to time. A loan of R120 000 at an interest rate of 1% a year was granted to him on 1 March 2020. Pete used the loan to purchase a flat. The flat had been let to tenants for the entire year of assessment at a monthly rental of R5 800. On retirement, Pete was required to repay the loan, which he did using the proceeds of a mortgage bond that he had taken out on the property. Interest incurred on the mortgage bond for January and February 2021 amounted to R3 000 in total. Assume the official rate of interest is 8% for the period 1 March 2020 to 31 July 2020 and 7,75% from 1 August 2020. Pete earned R10 000 of foreign dividends on his shares in the UK and R24 500 of interest on his South African investments. Pete paid R2 300 for his first provisional tax payment. Required:
Q.6.1	Discuss whether Pete Gregg is required to register for provisional tax purposes.	(2)
Q.6.2	Calculate Pete Greggs PAYE for the 2021 tax assessment. (If an amount is not to be included in the calculation then reflect this as zero and provide a reason as to why the amount is excluded.)	(18)
Q.6.3	Calculate Pete Greggs second provisional tax payment due for the 2021 tax year. (Hint: Start with the Balance of remuneration amount and make the necessary adjustments).	(15)