Questions 1

Emirati Lines (Pty) Ltd, a transport contractor, derives its incomes from the transport of goods (by truck), and the transport of fare-paying passengers (by bus). Since it makes both taxable and exempt supplies for VAT purposes, the Commissioner has agreed to an output basis of apportionment to arrive at an acceptable input tax ratio of 75%.

An analysis if its receipts and accruals and expenditure for its two-month tax period ending 31 December 2021 is set out below. Unless otherwise stated, all amounts are inclusive of VAT when applicable.

Receipts and Accruals Fares from transporting goods 805 000 Fares from transporting passengers 287 500 Interest levied on overdue accounts 10 465 Indemnity award (note 1) 16 100

Expenditure Bad Debts (note 2) 24 150 Bank Charges 1 380 Computer (notes 1 and 3) 20 700 Depreciation (note 3) 11 425 Insurance premiums (note 4) 17 480 Maintenance (note 5) 20 125 Office equipment rentals (note 6) 7 705 Salaries 379 500 Employees subsistence (note 7) 2 530 Petrol 121 900

Notes

1. The indemnity award of R16 100 was awarded for a notebook computer that was owned by Emirati Lines (Pty) Ltd and stolen from its premises in September 2021. On receipt of the indemnity award in December 2021, a new notebook computer was BACHELOR OF COMMERCE IN MANAGEMENT YEAR 3 ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 23 purchased by Travel Line (Pty) Ltd (note 3).

2. The bad debts written off by Emirati Lines (Pty) Ltd of R24 150 all relate to debtors from transporting goods.

3. Depreciation is charged on the following two assets owned by Emirati Line (Pty) Ltd: A motor car that is used by the managing director. It was purchased in January 2021 for R264 500 (R230 000 plus VAT at 15% of R34 500). Its managing director had sole use of this motor car for the entire tax period. A new notebook computer was purchased by it in December 2021 for R20 700 (R18 000 plus VAT at 15% of R2 700) to replace the notebook computer that was stolen (note 1). The notebook computer is used by employees in the accounting department to process its financial information. No depreciation has been provided by Emirati Line (Pty) Ltd in this two-month tax period for its trucks and busses since they have been depreciated in full (i.e. they have nil book value).

4. Insurance premiums were incurred by Emirati Line (Pty) Ltd for the motor car used by its managing director, the notebook computer, the trucks and busses operated by it. The insurance premium on the motor car used by its managing director was R1 610.

5. Maintenance costs were incurred by Travel Line (Pty) Ltd for the trucks and buses operated by it.

6. Office equipment rentals were incurred by Travel Line (Pty) Ltd for the following assets: Facsimile ( a fax machine) R3 680 Photostat machine R2 415 Cappuccino machine (a machine that provides coffee with a frothy-milk topping) R1 610

7. Employees subsistence includes tea, coffee, sugar, milk, and biscuits purchased by Emirati and provided to its employees during working hours.

REQUIRED:

1.1 Determine the net amount of Value-added Tax due to, or from, SARS for Emirati Line (Pty) Limited for the two-month tax period ended 31 December 2021.