JULY 2025 MAIN EXAMINATION

PROGRAMME Bachelor of Commerce in Accounting

MODULE Taxation 201

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INSTRUCTIONS TO CANDIDATES:

• Students are advised to carefully read and understand the questions before answering

them.

• Students must answer the questions fully but concisely and as directly as possible, using

sufficient research and application. All research should be referenced, using the Harvard

referencing protocols.

• Students should follow all specific instructions for individual questions (e.g., “list”, “in

point form”, “show all workings”).

• The mark allocation is an indication of the weight and the length of the question.

• The responses must be your own work. Plagiarism is a form of academic dishonesty and

will not be tolerated.

DATE: 21 July 2025 TIME: 08h30-11h30

DURATION: 3 hours MARKS: 100

Goolam Gani
EXAMINER: Romaana Karodia MODERATOR:
QUESTION ONE (45 marks, 81 minutes)
Spring Meadow (Pty) Ltd is a resident manufacturing company that operates in the agricultural
industry. It manufactures farming related products and wholesales these to the local market. Spring
Meadow is not a small business corporation as defined in the Income Tax Act. It’s financial year
ends on the last day of March. The following financial information of Spring Meadow has been
presented to you for the 2025 year of assessment:
1. Sales to local customers amounted to R 6 000 000
2. Raw materials were purchases during year at a cost of R3 500 625. Transport costs
amounting to 10 500 were incurred by Spring Meadow to transport these raw materials.
3. Spring Meadow holds 20% of the shares in Loro (Pty) Ltd. On 5 September 2024, Loro
declared and paid a dividend of R515 000 to its shareholders.
4. The following information relates to trading stock:
Stock on hand 1 April 2024 31 March 2025
Cost R 1 575 000 R 1 423 000
Market value R 1 887 000 R 1 677 882

During the year, the financial director took stock with a cost of R20 000 to give to her sister
as a gift. The market value of the stock taken was R25 000.

5. A donation of R 100 000 was made to a registered public benefit organisation. A section 18A
certificate was received for this donation.
6. Bad debts written off during the year of assessment amounted to R58 500.

7. The following amounts have been allowed by SARS as a doubtful debt allowance for the
current and prior year of assessment:
01/04/2023-31/03/2024 01/04/2024-31/03/2025
Doubtful debt allowance R 120 000 R 95 000

8. The following information relates to Spring Meadow’s fixed assets:

• On 1 August 2024, Spring Meadow purchased furniture costing R45 000 for its
administration office. On 1 February 2025, the company relocated the furniture to a new
administration office and incurred moving costs amounting to R15000.
• The old furniture was sold on 1 August 2024 for R29 000. It was originally purchased for
R35 000 on 1 July 2023.
• Spring Meadow purchased two manufacturing machines on 1 July 2024. Machine A was
purchased new for R200 000 and Machine B was purchased second-hand for R180 000.

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 • On 1 May 2024, the company completed the construction of its new factory building at a
cost of R 13 675 000. The building is used wholly in the process of manufacture.

9. The following employee expenses were paid:

• Salaries and wages R 480 000
• Contribution to medical aid fund in respect of employees R 125 000
• Leave pay R 34 000

10. On 1 February 2025 there was a robbery at one of Spring Meadow’s warehouses. Stock with
a value of R15 000 was stolen. The insurance company paid Spring Meadow an amount of
R12000 as compensation for the stolen stock.

11. Spring Meadow paid an amount of R16 000 to an agricultural society in order for them to
overlook possible fines when it encountered environmental issues.

12. Spring Meadow paid the business insurance premium of R120 000 on 1 July 2024 relating to
the period 1 July 2024 to 30 June 2025.

13. Other tax-deductible expenditure amounting to R230 000 was incurred.

14. Binding general ruling No 7 allows for furniture and fitting to be written off over a period of 6
years.

Required (45 marks):

Calculate the tax liability of Spring Meadow (Pty) Ltd for the 2025 year of assessment. (45 marks)

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QUESTION TWO (15 marks, 27 minutes)
Wood Art (Pty) Ltd is a resident furniture manufacturer with a year of assessment that ends on 28
February 2025.

The company’s factory building was destroyed in a fire on 15 June 2024 and Wood Art received an
insurance payout of R 3 850 000 on 30 June 2024.

The building was acquired on 1 January 2001 for R 2 600 000. Valuation costs of R12000 were paid
to a sworn appraiser on 15 February 2002 who determined the market value of the building to be
R600 000 as at 1 October 2001. The time apportionment base cost on 1 October 2001 is R720 447
and the total capital allowances claimed on the factory building up to the date it was destroyed was
R1950 000.

Required (15 marks):

Calculate the taxable capital gain of assessed capital loss for the year of assessment ended 29
February 2025. (15 marks)

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QUESTION THREE (15 marks, 27 minutes)

Winners (Pty) Ltd is a company that sells sporting equipment. It is a South African resident company
and it also rents out sports equipment to its customers Winners’ year of assessment ends on the last
day on February.

On 20 December 2024, Winners rented out Golf Carts to players at a Golf Tournament. On 13
January 2025, Winners received a claim from one of the participants of the golf day, Glen Evans, for
injuries sustained as a result of an accident when the brakes of the golf cart failed.

Winners settled the claim out of court on 31 January 2025 and paid Glen Evans an amount of
R15 000 on 11 March 2025.

Required (15 marks):

Discuss with reference to case law and legislation, whether Winners (Pty) Ltd will be able to claim
the payment made to Glen Evans as a deduction for the 2025 year of assessment (14 marks)

Decision making and judgement – 1 mark

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QUESTION FOUR (25 marks, 45 minutes)

Goodstop Service Station (Pty) Ltd (“Goodstop”) is a fuel filling station with a mini supermarket on
site. Goodstop is a resident company and a registered VAT vendor. All amounts include VAT where
applicable. The following information was provided to you for the two-month tax period ended 31
March 2025:
Income
Fuel sales 1 725 000
Shop sales 402 500

Expenses
Purchases – fuel 1 150 000
Purchases – shop 247 250
Bank charges (note 1) 5 885
Laptop (note 2) 8 500
Depreciation (note 3) 50 000
Lease payments (note 4) 1 050
Office equipment (note 5) 2 675
Tea and coffee for employees 1 825
Travel expenses (note 6) 35 220
Salaries and wages 42 554
Insurance premium 5 750

Notes:
1. Bank charges for the two-month tax period dare made up as follows:
Interest in overdraft R 5 500
Electronic banking fees R 350
Cheque book fee R 35

2. The owner purchased a second-hand laptop for use in the business from a non-vendor at a cost
of R 8 500 and the market value was R 9 500. The purchase price was paid in full immediately.

3. The depreciation charge relates to a single cab bakkie owned by Goodstop. It was purchased in
2022 at a cost of R 287 500 (including VAT of R 37 500). The manager on Goodstop had the
sole use of the bakkie for the entire two-month tax period.

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4. Goodstop leases a scanner under a finance lease agreement that was entered into on 1 March
2024. The scanner cost R17 825 excluding finance charges. The monthly instalments for the
next 36 months are R1050.

5. Office equipment rentals for the two-month tax period are as follows:
Photocopy machine R 1 725
Coffee machine R 950

6. Travel expenses comprise R 3 220 for hotel accommodation and meals incurred by the manager
of Goodstop during an out-of-town business trip to Johannesburg. R 32 000 was paid for
overseas air tickets were purchased for the manager and his wife to attend an annual work-
related convention.

Required (25 marks):

Calculate the VAT payable by/refundable to Goodstop Convenience Centre (Pty) Ltd for the two-
month period ended 31 March 2025. Provide brief reasons for your answers. (24 marks)

Presentation and communication skills – 1 mark

END OF QUESTION PAPER