ASSESSMENT 1 TAX2AB0

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FACULTY/COLLEGE College of Business and Economics

SCHOOL School of Accounting
DEPARTMENT Accountancy
CAMPUS(ES) APK
MODULE NAME Taxation 200
MODULE CODE TAX2AB0
SEMESTER First
ASSESSMENT OPPORTUNITY, Assessment 1
MONTH AND YEAR March 2021

ASSESSMENT DATE 12 March 2021 TIME 8:30 – 9:30

ASSESSORS Mrs M Wassermann
Mr J Wessels
MODERATOR(S) Mrs L Barnard
DURATION 1 hour (60 min) TOTAL MARKS 40

NUMBER OF PAGES OF QUESTION PAPER (Including cover page) 5

INSTRUCTIONS:
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1. This paper consists of X pages.
2. You are reminded that answers may NOT be written in pencil. NO tippex may be used.
3. The marks shown against the requirement(s) for every question should be regarded as an
indication of the expected length and depth of your answer.
4. Answer the questions by the use of:
- effective structure and presentation;
- clear explanations;
- logical arguments; and
- clear and concise language.
5. Show all calculations clearly.
6. Round all amounts to the nearest Rand.
7. All open spaces must be crossed out with a pen. Failure to cross out the open spaces will
disqualify you from handing in your script for a remark.

Question Marks Time allocated (minutes)

1 20 30
2 20 30
Total 40 60
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ASSESSMENT 1 TAX2AB0
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QUESTION 1 21 MARKS

JW Drivers (Pty) Ltd (“JWD”) is a company that offers Driving Lessons to people who
wants to take do the official drivers licence tests.

JWD employs 5 driving instructors and 1 administrative worker. JWD sells driving
lessons in packages of 10 lessons. Learner drivers have to pay for the 10 lessons up
front. The VAT invoice is issued when the payment is received. Learner drivers have
to pay R200 per lesson, and pay R800 per day if they want to rent a vehicle to use for
their driver’s licence test.

JWD sells the K53 Learner Driver book from its office.

The company owns 5 passenger vehicles that are used for the driving lessons, and 1
passenger vehicle that it rents out for learner drivers when they take their driver’s
licence test. The 5 passenger vehicles used for the driving lessons have been
converted that the passenger side also has the three pedals (clutch, brake and
accelerator), to give the instructor control over the vehicle if the student driver might
cause an accident.

All goods and services supplied to JWD were supplied by VAT vendors.

REQUIRED:
1.1 The administrative worker had a look at your Taxation 200 notes, and is
confused about what type of supply the driving lessons will be. Discuss whether
the supply of driving lessons will be subject to VAT, and at what rate if
applicable. Include in your answer the relevant type of supply that could
confuse her. (You can ignore the “vendor” element.) (5)
1.2 If you assume that JWD is a VAT vendor, should it charge VAT on the rental of
the one passenger vehicle that it rents out for driver’s licence tests? Supply a
short reason for your answer. (2)
1.3 If you assume for this part of the question that the driving lessons are subject
to VAT, will JWD be able to claim the input VAT on the passenger vehicles it
purchased to use for the driving lessons? (2)
1.4 If you assume that JWD is a VAT vendor, when should JWD account for the
VAT on the driving lessons? (multiple choice) (1)
a) VAT should only be accounted for per driving lesson on the date of the
driving lesson.
b) VAT should be accounted for on the date of the first driving lesson of the
series of 10 lessons.
c) VAT should be accounted for on the date when the driving lessons are
booked.
d) VAT should be accounted for on the day when the payment for the 10
lessons is received.
e) VAT should be accounted for on the day when the invoice for the 10 lessons
is issued.

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f) VAT should be accounted for on the earlier of the invoice being issued or
payment is received for the 10 lessons.
g) VAT should only be accounted for on the date when the learner driver pass
their driver’s licence.
h) None of the other options.
1.5 For this part of the question assume that JWD is a VAT vendor. Give the
correct VAT treatment for the current VAT period (1 January 2021 – 28
February 2021) for each of the following transactions that were obtained from
the trial balance: (All amounts are rounded to the nearest Rand) .
Transaction

1 Sale of 10 driving lessons. Five will be in the period 1 January 2021 –

28 February 2021, and five will be during March 2021.

2 Salaries paid to the driving instructors for February 2021 of R100 000.

3 Chocolates purchased for R1 150 to give to learner drivers who passed

their driver’s licence during the week preceding Valentine’s day.

4 Fuel for vehicles used for driving lessons: R1 500

5 Insurance on vehicle that is rented out for February 2021: R700

6 Stationery purchased to use in the office: R860

7 Bank charges of R350 paid for February 2021

8 Interest of R686 paid on bank overdraft

9 Sale of K53 books (10 books at R184 per book)

10 Rental for piece of land where drivers learn to park. JWD prepaid for
the full 2021 year: R120 000.

(10)
1.6 Students will get one of the following 4: (1)
The fact that VAT vendors are allocated to a VAT category, adheres to the
following of Adam Smith’s maxims:
- Certainty
- Economy
- Convenience
- Equality

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QUESTION 2 20 MARKS

PART A 8 Marks

Question 1 (4 marks)

With regards to the Brummeria Renaissance court case, explain the following in your
OWN words:

a) The facts of the case

b) The judgement of the case
c) The principle that was established by the case

Scenario 2

Question 2 (4 marks)

With regards to the Pyott court case, explain the following in your OWN words:

a) The facts of the case

b) The judgement of the case
c) The principle that was established by the case

REQUIRED:

PART B 12 Marks

(Each student will get 6 out of 12)

Fill in the multiple blanks.

Scenario 1 (2)

In the _____________ court case, it was decided that credit sales will have to be
included in gross income, as the taxpayer has already become ______________ to
the amount. (People’s Stores; entitled)

Scenario 2 (2)

The ___________ court case brought forward the principle that not only cash or
money received should be included in gross income, but that the term amount should
be granted a _________ meaning to not only include money. (Lategan; wider)

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Scenario 3 (2)

In the ______________ court case, it was established that it is the responsibility of the
South African Revenue Service to determine the ____________ to be included in
gross income. (Butcher Bros; amount)

Scenario 4 (2)

According to the ___________ and the ______________ court cases, money made
from activities that are against the law should also be included in gross income. (MP
Finance; Delagoa Bay Cigarettes)

Scenario 5 (2)

The _______________________ court case found that once income has accrued,
what you do with the money there after is irrelevant. In this court case, the taxpayer
only had a ___________ obligation to dispose of the proceeds in favour of a third
party. (Witwatersrand Association of Racing Clubs; moral)

Scenario 6 (2)

In the ____________ court case it was found that __________ is what capital
produces. (Visser; income)

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