Best-Bus (Pty) Ltd is a South African based transport company, situated in Polokwane. Best Bus (Pty) Ltd's main business is the transportation of passengers from Polokwane to other South African cities, that include Johannesburg, Durban, Cape Town and East London.
 
Best Bus (Pty) Ltd started doing business in January 2020. Best Bus (Pty) Ltd has a 31 December year-end and is a registered VAT vendor. During their 2020 year of assessment, Best Bus (Pty) Ltd made sales to the value of R2 945 000 in respect of bus tickets that they sold to passengers. Furthermore, Best Bus (Pty) Ltd made sales of R156 000 for refreshments they sold to passengers on board their busses.
 
 During February 2020, Best Bus (Pty) Ltd bought three 60-seater Volvo busses that were brought into use on 1 March 2020. All three busses had a cost price of R1 552 500 (incl. VAT) each.
 
Best Bus (Pty) Ltd makes use of their own support team that assist the bus drivers with breakdowns or flat tyres. Best Bus (Pty) Ltd purchased an Isuzu Fleetside single cab bakkie at a cost of R287 500 (incl. VAT). The bakkie was brought into use on 1 April 2020. On 30 November 2020 the Izuzu's engine seized due to a faulty part in the engine. Best Bus (Pty) Ltd was waiting for a replacement bakkie from Izuzu that would be replaced under warranty. The new bakkie arrived at the Best Bus (Pty) Ltd premises on 1 January 2021.
 
Best Bus (Pty) Ltd built a new warehouse and terminal building in Polokwane that they base their operations from. This building was constructed at a cost of R3 500 000 (excl. VAT) and was immediately brought into use upon completion on 1 February 2020. These premises also serve as a bus terminal, as all their busses depart from here.
 
On 1 June 2020, Best Bus (Pty) Ltd bought a hydraulic air pump to assist the support team with flat tyres. The air pump was bought from Builders Warehouse for a cost price of R6 500 (excl VAT).
 
During 2020, Best Bus (Pty) Ltd built 6 small flats behind their warehouse as accommodation for their bus drivers, support team and mechanics. The residential units were constructed at a cost price of R190 000 (excl. VAT) each, and were completed on 1 July 2020.
 
SARS allows the following write off periods:
Busses: 6 Years  
Motor vehicles: 5 Years  
Hydraulic Pumps: 4 Years
 
REQUIRED:
a) Will Best Bus (Pty) Ltd be able to claim the input VAT on the capital purchases that they made in 2020? Shortly motivate your answer. Assume for this required that Best Bus (Pty) Ltd is a registered VAT vendor.  
 
b) Will Best Bus (Pty) Ltd have to charge output VAT on the sale of the refreshments? Shortly motivate your answer.  
 
c) Calculate Best Bus (Pty) Ltd's capital allowances for their 2020 year of assessment. Show all your calculations.  
 
d) The Managing director of Best Bus (Pty) Ltd does not understand what a capital allowance is. Explain to him what capital allowances are, why taxpayers need capital allowances, as well as what the impact of capital allowances are on a taxpayers taxable income. 

 

Answer rating: 100% (QA)

Answer Explanation a Yes Best Bus Itd is entitled to claim input VAT on its capital purchs sin... View the full answer