On 27 September 2019, management of Bannor (Pty) Ltd, a registered VAT vendor, decided to sell the existing delivery vehicle for R300 000 (excluding VAT) and replace it with a new one. The original vehicle was purchased second-hand from a non-vendor for R287 500 (excluding VAT) on 1 June 2018. SARS prescribes a write off period of six years for vehicles. Bannor (Pty) Ltd approached Deals-on-Wheels (Pty) Ltd, who gave the company the option to either buy the asset or enter into a lease agreement. Should the lease option be chosen, ownership will transfer at the end of the lease for no additional consideration. Regardless of the option chosen, the terms of each agreement will be as follows: Effective date of transaction: 1 October 2019 Date asset is brought into use: 1 October 2019 Cash value inclusive of VAT: R404 800 Applicable interest rate: 8.5% Period: 4 years Repayment terms: Annually in arrears Deals-on-Wheels (Pty) Ltd originally purchased the delivery vehicle as trading stock for R281 600. Both companies are registered VAT vendors and neither company qualifies as a small business corporation.

Calculate the following amounts that would appear in the tax calculation of Bannor (Pty) Ltd: 

Q1: Lease and buy a) Calculate the annual repayment for both options 

Q2: Assume Bannor (Pty) Ltd purchased the delivery vehicle: a) Interest deductible for the year ended 30 September 2023 Deduction or allowance to be claimed in respect of the new vehicle for the year ended 30 September 2023 Any recoupment to be included per S8(4)(e), if applicable, for the year ended 30 September 2023 Any taxable capital gain to be included per par 66, if applicable, for the year ended 30 September 2023 Any additional recoupment to be included in terms of section 8(5) at the end of the period i.e. for the year ended 30 September 2023 Calculate the allowances or deductions in respect of the asset for the year ended 30 September 2024 

Q3: Assume Bannor (Pty) Ltd leased the delivery vehicle: b) Interest deductible for the year ended 30 September 2023 c) Deduction or allowance to be claimed in respect of the new vehicle for the year ended 30 September 2023 d) Any recoupment to be included per S8(4)(e), if applicable, for the year ended 30 September 2022 e) Any taxable capital gain to be included per par 66, if applicable, for the year ended 30 September 2023 f) Any additional recoupment to be included in terms of section 8(5) at the end of the lease period i.e. for the year ended 30 September 2023 g) Calculate the allowances or deductions in respect of the asset for the year ended 30 September 2024 Q4: Assume Deals-on-Wheels (Pty) Ltd sold the delivery vehicle: a) Calculate taxable income for Deals-on-Wheels (Pty) Ltd for the year ended 30 September 2020

Answer rating: 100% (QA)

SOLUTION To calculate the amounts that would appear in the tax calculation of Bannor Pty Ltd for the given scenarios well go through each question step by step Q1 Lease and buy a Calculate the annual ... View the full answer