You are the financial manager of Emperors (Pty) Ltd, a property company earning its income from both commercial rentals (office blocks and factories) and residential rentals (town houses). The company has a December year-end. Your responsibilities include the completion of its two-monthly VAT return. As Emperors (Pty) Ltd makes both taxable and exempt supplies for VAT purposes, it has applied the turnover-based method of apportionment to arrive at an acceptable input tax ratio of The accounting system operated by Emperors (Pty) Ltd has provided the following analysis of its income and expenditure for its two-month tax period ending 31 January. All amounts are inclusive of VAT, where applicable.

Income

Commercial rentals 849 300

Residential rentals 159 600

Interest levied on overdue rentals 7 410

Insurance settlement (note 1) 136 800

Expenditure

Purchase of new factory building, to be let (paid in cash 769 000

Purchase of two residential flats, to be let (paid in cash) 468 500

Bank charges 1 254

Audit fees 14 250

Salaries and wages 66 120

Bakkie (note 2) 150 600

Depreciation (note 2) 5 105

Maintenance (note 3) 16 416

Insurance premiums (note 4) 15 048

Interest incurred on mortgage bonds 85 500

Office equipment rentals (note 5) 5 244

Employees expenses (note 6) 741

Bad debts (note 7) 16 188

Travelling expenses (note 8) 2 508

Notes

1. The insurance settlement of R136 800 was for a single-cab light-delivery vehicle (bakkie) that was stolen from Emperors (Pty) Ltds premises in the previous month. This bakkie was used for both the residential and commercial properties. At the time it was stolen, the book value of this single-cab bakkie was R160 200. In January, on receipt of the insurance settlement, a new single-cab bakkie was purchased by Emperors (Pty) Ltd (see note 2).

2. A new single-cab bakkie was purchased in January at a cost of R150 600 (including VAT of R18 495) to replace the single-cab bakkie that was stolen (see note 1 above). Depreciation was provided for on the bakkie purchased by Emperors (Pty) Ltd. This bakkie is used to transport its maintenance teams between its various buildings.

3. Maintenance costs of R16 416 include paint, paint brushes, and other hardware items purchased to effect repair work to all its buildings.

4. Insurance premiums, in terms of an all-comprehensive business insurance policy, to the amount of R15 048 were incurred in respect of all the assets of the company.

5. Office equipment rentals of R5 244 were incurred on the following assets:

Facsimile machine 2 736

Printer 1 482

Coffee machine 1 026

Total 5 244

6 Employees expenses of R741 were incurred in respect of tea and coffee provided to employees while they were working in their offices.

7. Bad debts of R16 188 are made up of debts written off for commercial-rental debtors of R9 804 and for residential rental debtors of R6 384.

Question 1

You are required to: Calculate the net amount of VAT refundable by or payable to SARS in respect of Emperors (Pty) Ltds two-month tax period ended 31 January, assuming all the necessary documentation has been obtained by the company. Should no VAT be raised or claimed, provide brief reasons. NB: Round up all figures to the nearest rand.

Question 2 (10 Marks)

YOU ARE REQUIRED TO calculate the effect of the above transactions on Exclusive Gifts taxable income for its year of assessment ending 31 March 2022.

Round off to the nearest rand. Ignore VAT.