QUESTION $2(13$ marks$)$

You are a tax consultant at TaxMasters $($Pty$)$ Ltd $($TaxMasters$)$ which provides tax

services to small and medium$-$sized businesses. Pearl Lewis, a client of TaxMasters,

has requested tax advice from your firm and you have been appointed to assist her.

Pearl owns a duplex building in Cape Town, which she purchased in January $2020$

from a VAT vendor for R$2000000.$ She used the ground floor for her beauty salon,

Pearl Glamour $($Pty$)$ Ltd $.$ Pearl and her husband used the upper floor as their living

space.

SARS has accepted that $50\%$ of the building pertains to the beauty salon.

Pearl decided to sell the building for R$2500000.$ She found a buyer and sold the

building on $1$ August $2023,$ the buyer settled the full purchase price in cash on the

same date. The building was registered in the name of the buyer on $15$ September

$2023.$

REQUIRED:

Discuss all the VAT consequences for Pearl Lewis.

Your discussion should include the value and timing rules with a clear explanation

and reference to the VAT Act to support your answer.

Clearly distinguish between output tax and input tax.

Round to the nearest rand.

$(13$ marks$)$

ANNEXURE I: FORMATIVE ASSESSMENT $2$

$99$ HTAX$331-1-$Jan$-$June$2024-$FA$2-$V$3-$AP$-19012024$

Competency Framework Reference:

E$1\mathrm{.}2$ Interpretation of tax legislation

b$)$

Demonstrate the ability to apply principles of tax interpretation to any new

or unfamiliar tax legislation.

E$1\mathrm{.}3$ Application of tax legislation to calculate tax obligation

a$)$ Analyse the taxpayer$$s tax profile

b$)$

Analyse the transaction or event, identify the profile of the interacting

parties, and identify and explain taxes and anti$-$avoidance provisions of

possible application.

c$)$ Apply the relevant law to the facts for companies.

E$1\mathrm{.}4$ Application of tax legislation to comply with administrative provisions

b$)$

Prepare VAT and Income Tax returns in compliance with applicable tax

filing requirements for individual taxpayers or companies and other

incorporated entities undertaking.

Y$3$ Problem$-$solving

a$)$ Use a questioning mindset during problem identification and analysis.

b$)$

Weigh the relevance and accuracy of information; challenge assumptions

and probe for detail.

Y$5$ Professional scepticism

a$)$

Obtain and understand the information in order to challenge views

developed by others.

b$)$

Evaluate the integrity of the information, its source, and the appropriateness

of the presentation.

e$)$

Demonstrate convergent thinking by testing plausible explanations through

the evaluation of assumptions and identification of potential bias and other

impediments.