QUESTION $1$

Decrease in extent of taxable use of capital goods or services

Ms C $($a registered VAT vendor$)$ owns a double$-$storey building situated in Cape Town.

The building is used for mixed purposes, in that it has $8$ shops on the ground floor

used for making taxable supplies and $4$ large residential apartments on the first floor

used for making exempt supplies. The building has been applied as such from

commencement of the business in March $2008$ when the building was acquired for R$1$

$368000($inclusive of VAT$).$ Ms C elected to use the standard turnover$-$based method

of apportionment and determined that she derived $80\%$ of her income from taxable

supplies and $20\%$ from exempt supplies. Therefore, in the April $2008$ tax period, she

deducted input tax of R$134400(14/114$ R$136800080\%)$ in respect of the

building.

In March $2009,$ Ms C further purchased a computer system for R$54000($inclusive of

VAT$),$ intended for use in her business. At the time of purchasing the computer system,

Ms C still derived $80\%$ of her income from taxable supplies and $20\%$ from exempt

supplies. Therefore, in the April $2009$ tax period, she deducted input tax of R$5305(14$

$/114$ R$5400080\%)$ in respect of the computer system acquired.

At the end of February $2022,$ Ms C determines that the nature of her business has

changed significantly and that her income now comprises of $60\%$ taxable supplies and

$40\%$ exempt supplies. At the end of that month the cost and OMV of the building is R$1$

$368000$ and R$2280000,$ respectively, and the computer system has an OMV of

R$48000.$