You are one of the members of the audit team of the external auditors of GREEN Company (Pty) Ltd . You are tasked with the verification of the salary expense on the Statement of Comprehensive Income. GREEN Company is a registered VAT vendor.

The following information relating to Mark kent that has been selected as part of the audit sample on the salary expense, is available: Note		January 2021			February 2021
R				R
Basic salary		50 000			50 000
Plus:
Reimbursive travel allowance	1			29 250		18 000
Fringe benefit use of company laptop	2			475		475
Fringe benefit trading stock provided to employee	3			0		2 340
Fringe benefit medical scheme contribution	4			5 127		5 127
Total remuneration		84 852			75 942
Less:
Reimbursive travel allowance tax deduction	1			(25 870)		(15 920)
Retirement annuity fund contribution	5			(15 000)		(15 000)
Medical scheme fees tax credit tax deduction	4			(638)		(638)
Balance of remuneration		43 344			44 384
Less:
Employees tax		(12 300)			(10 800)
Medical scheme contribution paid to scheme	4			(5 127)		(5 127)
UIF contribution employees portion	6			(150)		(150)
Add back:
Reimbursive travel allowance tax deduction	1			25 870		15 920
Medical scheme fees tax credit	4			638		638
Net salary payable to employee		52 275			44 865
Notes:
To comply with International Financial Reporting Standards (IFRS) / International Accounting standards (IAS), GREEN Company requires employees to submit their monthly travel claims (for purposes of the reimbursive travel allowance) on the 25th of every month for the travel expenditure of employees to be recorded in the correct period, which is the period in which the expense is incurred and consequently claimed by the employee. However, the travel claim, although included in the payslip of the relevant month, is only paid (separately) in the month following the month that it is claimed, to allow enough time for the claims to first be verified. This means that Marks travel claim for January is included in his January payslip, but only paid separately in February.
Mark Kent submitted his travel claims on time. During January and February 2021, he claimed business kilometres travelled of 6 500km and 4 000km respectively.GREEN Companys official rate per kilometre at which travel claims are reimbursed is R4.50 per kilometre. Mark travelled 8 000km and 4 800km in total for January and February 2021 respectively.
Mark owns the vehicle with which he travels for GREEN Company. The vehicle cost him R483 000 (including VAT, excluding finance charges). He has been using this vehicle to travel for GREEN Company and for private travel since November 2019. John pays for all the costs in respect of maintenance and fuel.
was granted the use of a company owned laptop which he uses mainly for business purposes. GREEN Company calculates the salary cost of this benefit at 15% per month on the cost price of the asset. Johns company laptop cost GREEN Company R43 700 (including VAT) on 1 September 2020 when John acquired the use of the laptop.
Employees may take some of the companys trading stock for personal use for free. This is a taxable benefit and in terms of company policy this benefit is regarded as salary cost for the company at the same rate as the fringe benefit amount for tax purposes. Mark took trading stock with a cost price of R2 070 (including VAT) and a market value of R2 340 (selling price for GREEN Company, excluding VAT) for personal use during the month of February.
In terms of company policy, GREEN Company pays 60% of the employees total medical scheme contribution. The employee therefore contributes only 40%. Marks total monthly contribution to the medical scheme, for himself and his wife, is R5 127.
Mark requested GREEN Company to deduct Retirement Annuity Fund (RAF) contributions on his behalf from his salary and pay it over to the fund to ensure that he gets the maximum tax benefit from these contributions. Since Mark previously did not contribute to any retirement fund, his broker advised him to contribute at least R15 000 per month. Mark is 48 years old.
UIF contributions must be made in terms of the law and both the employer and employee must each contribute 1% of the gross salary. However, also in terms of the law, the amount of the contribution is capped at R150 per month.

QUESTION

(a)		As part of the audit verification procedures of the salary expense, you are required to re-calculate the employees tax for February 2021 that GREEN Company had to withhold from Marks salary. Assume that the monthly remuneration amount, only for purposes of any section 11F deduction, is R50 000. Any Rnil or non-taxable item(s) must be supported with a valid reason or relevant reference to the Income Tax Act.		18
(b)	Provide a brief discussion on whether there is a difference (from GREEN Companys viewpoint) between the tax treatment of the reimbursive travel allowance paid by ABC Company to Mark for February 2021 in terms of the Income Tax Act and the accounting treatment in terms of IFRS/IAS. Support your answer with relevant references to the Income Tax Act and valid reasons for the accounting treatment. No calculations are required. You must ignore deferred taxation in your discussion. Communication clarity of expression				7
(c)		In a private conversation with you, Mark asked you how to calculate the amount that he expended on business travel when he submits his annual tax return even though he did not keep record of actual vehicle and travel expenses incurred. Provide Mark with a calculation of the amount that will be included in his taxable income for his 2021 year of assessment for the reimbursive travel allowance, on the assumption that he would elect the most beneficial option available to him, without keeping record of actual vehicle and travel expenses incurred. You may assume that Mark travelled 55 000km in total for the 2021 year of assessment, of which 49 500km was for business purposes (correctly calculated, also for purposes of section 7B). Ignore any effect or stipulation regarding variable remuneration. Ignore actual cost per kilometre.		8