You are a Tax Consultant. The Accountant at Pretty Limited, a well-known company in the Pretty industry, approached you to assist him with the value-added tax treatment of the transaction below. Pretty Limited is a registered value-added tax vendor whose year of assessment ends on 28 February 2023.

The Accountant explained to you that Pretty Limited has various incentive rewards to keep the companys employees motivated.

The contract of employment of Robyn, the Brand Manager of Pretty Limited, includes an all-expenses-paid three-week holiday for herself and her family anywhere within South Africa. In Pretty Limiteds 2023 financial year, Robyn chose Cape Town as her holiday destination. Pretty Limited paid her and her familys airfares, car hire, and hotel account.

After this three-week holiday (21 days) with her family, her family returned to Johannesburg, but Robyn stayed on in Cape Town for a weeks business (5 days). She stayed on at the hotel and continued to lease the hired car. All expenses covering the holiday, as well as the week of business, were still outstanding at the end of Pretty Limiteds 2023 year of assessment. The expenses were as follows:

Hotel accommodation:

The total hotel accommodation cost for the 26 days amounted to R44 850. The daily hotel rate is R1 725 (VAT inclusive at 15%).

Car rental:

Pretty Limited paid R8 970 (VAT inclusive at 15%) for the 26 days to hire the car for Robyn and her family.

Airfares:

Pretty Limited paid total airfares of R25 300 (VAT inclusive at 15%) / R6 325 per person for Robyn, her husband, and their two children, resulting from the holiday and business trip.

1. Separately for each expense, discuss if Pretty Limited may claim input VAT on the expense or not. Support your answer with references to the Value-Added Tax Act and provide calculations where applicable.
2. Briefly discuss if Pretty Limited must raise output VAT on the supply of the holiday accommodation, which is the supply of a fringe benefit. Support your answer with references to the Value-Added Tax Act.