1.1 11 (D), 11 (E), 11 (O0,12 (C) 2022

Taxation 2
First Semester
Introduction Capital Allowance are
very similar as depreciation for
accounting purposes,
Lecturer Details
• Ms. BR Scheepers
• G7//Lemmy Mule
THE 5 P’s OF SUCCESS
 Prior
 Planning
 Prevents
 Poor
 Performance
Study MethodStStuduSStudy
1. Work through the prescribed textbook
references in detail (do all examples in the
textbook).
2. Use the class slides as an overview.
3. Work through all the assignments.
SYLLABUS
1. Capital Allowances and Recoupments

2. Partnerships
3. Close Corporations
4. Trading Stock
5. Assessed Losses
6. Companies
7. Farming
8. Retirement Benefit Planning
UNIT 1 Repairs Section 11 (d)
• Expenditure
• Actually Incurred
• During the year of assessment
• Assets used in trade
• Building
• Immovable Property
• Machinery and Equipment
 Improvements Disallowed
Unit 1 Wear and Tear Allowances
 Used for the purposes of trade
 Cost excluding VAT and finance charges
 Period of use > 12 months apportioned
 Include Moving Costs
 Small Assets < R 7000 write off
 Bought or Instalment Sale
• Interpretation Note 47 page HH 171 HH1020
• Straight Line Method or Reducing Balance Method;
• Write off periods
• Passenger Vehicles 5, Trucks 4; Heavy Duty 3.
• Pro rate
Example 1
• ABC Trucks (Pty)Ltd year end is 31 December the

company purchases a truck the total payments of the
instalments sale is R 1 960 000 which includes vat and
finance charges of R810 000 over a 3 year period. The
Truck is delivered on the 30 June 2019 and used for the
first time when the driver obtains his heavy duty
licence on the 31 July 2019.
• SARS allows a 3 year write off period of heavy duty
trucks.
• (a)Calculate the wear and tear for 2019 and 2020,
ignore VAT implications (b)Calculate the wear and tear
for 2019 and 2020, take VAT implications into account.
Example 1(a) Memo
Ignore VAT
Question 1 (a)
Total Amount 1960000 Total Price including Finance Costs
Deduct Finance Costs -810000 Always Exclude Finance Charges
1150000 Cost Price Including VAT
Cost of Asset VAT Inclusive 1150000 Ignore VAT as the purchaser is a NON VAT VENDOR
Section11 (e )
2019 1 150 000x(1/3) x (5/12) 159722.2 Section 11 (e ) prorata year starting from date brught into use
When the question instructs you to ignore the VAT implacations
No VAT adjustment is necessary.
383333.3 You have to use 5 months in the calculation.
2020 1 150 000x(1/3) x (12/12)
Example 1(b) Memo
In 1 (b) the VAT should be eliminated
Question 1 (b)
Total Amount 1960000 Total Price including Finance Costs
Deduct Finance Costs -810000 Always Exclude Finance Charges
1150000 Cost Price Including VAT
Cost of Asset 115 000x100/115 1000000 Always calculate on the amount excluding VAT for a VAT VENDOR
When the question instructs you take the VAT implacations into account
Section11 (e )
2019 1 000 000x(1/3) x (5/12) 138888.9 Section 11 (e ) prorata year starting from date brught into use
You have to use 5 months in the calculation.
2020 1 000 000x(1/3) x (12/12) 333333.3
Disposal of Asset Allowance
• Taxpayer elects section 11(o)
• Assets Scrapped , Alienated; destroyed and
not available for production
• Assets Disposed (Previously Scrapped)
• Allowance =(Cost of Asset – W& T)-Proceeds
• Write off < 10 years
• 11 (e);11 B; 11D;12 B;12C; 12 DA;12E;37b(2)
• Not available to connected persons
Special Allowances Section 12 (C)
• New or Unused
• Acquired(Instalment sale)
• By Taxpayer(lessor) first time
• Four Year w/o 40/20/20/20 after1/3/2002
• Three Year w/0 50/30/20 after 1/1/2012 Research
and Development
• Other Five Year w/o 20/20/20/20/20 (Second hand)
• Not prorated
Example 2
• The truck driver of ABC Trucks (Pty) Ltd drives
the truck over an embankment on the 31
December 2020. The Insurance company pay the
company R115 000 for the remains of the truck.
ABC Trucks (Pty) Ltd is a VAT VENDOR.
• Use same data as in example 1.
• Calculate the tax consequences for the company

for the 2020 tax year.
Example 2
Total Amount 1960000
Deduct Finance Costs -810000
1150000
Deduct VAT 150000
Cost of Asset VAT Exclusive 1000000
Section11 (e )
2019 1 000 000x(1/3) x (6/12) -166667
2020 1 000 000x(1/3) x (12/12) -333333
Tax Value 500000 Cost less all capital allwances to date
Proceeds VAT Exclusive (11500x100/115) 100000

Less Tax Value 500000
Cost VAT Eclusive less Tax Value -400000 Section 11 (d) tax write off
Section 12 C
• Industrial Plant and Equipment
• Agricultural Co=Op Machinery & Plant
• Hotelkeeper Machinery and Plant
• Aircraft
• Ships
• Research and Development Plant & Machinery
• Improvements to the above

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Taxation 2

1. Capital Allowances and Recoupments

• ABC Trucks (Pty)Ltd year end is 31 December the

• Calculate the tax consequences for the company

2020 1 000 000x(1/3) x (12/12) -333333

Tax Value 500000 Cost less all capital allwances to date

Proceeds VAT Exclusive (11500x100/115) 100000

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