QUESTION ONE

$[50]$

Sofiah's Motor Corporation $($SMC$)($Pty$)$ Ltd is the twelth largest motor dealer in South Africa, providing vehicles and trucks to customers around the country as well other African countries. It has an extensive customer base, which has been created over the past few years. The current financial year ends on $30$ June $2023.$ SMC is a registered VAT vendor, and all amounts exclude VAT unless otherwise stated.

The following information relates to SMC$\text{'}$s activities for the current financial year:

Gross income from SA customers amounts to R$4175000($including VAT$),$ while sales from customers outside SA amounted to R$1380000($including VAT$).$

SMC$\text{'}$s employees belong to the company's pension fund and medical aid fund. SMC contributes to these funds on behalf of the employees. During the year, contributions on behalf of the employees to the pension fund amounted to R$156000$ and to the medical aid fund R$191000.$ SMC$\text{'}$s total remuneration approved by the Commissioner is R$1652000.$

The financial manager, Miss Aaminah, resigned on $31$ July $2021.$ To prohibit her from trading in direct competition to SMC$,$ the company paid her an amount of R$450000$ as compensation for her restraint of trade for the following $5$ years. The full amount was included in Miss Aaminah's income on her $2022$ income tax return.

Legal fees to the amount of R$115000$ were incurred. This was made up of R$55200($including VAT$)$ for the collection of outstanding trade debtors and R$59800($including VAT$)$ in respect of employee remuneration claims. $($Note: employee remuneration is deductible for purposes of this question.$)$

Penalties and interest paid to SARS amounted to R$21500$ in respect of the current year of assessment.

SMC received speeding fines worth R$28750($including VAT$)$ because of employees' test$-$driving vehicles for customers. This was paid in the current year of assessment.

Bad debts written off consist of R$73000$ in respect of a loan to an employee and R$828000($including VAT$)$ in respect of trade debtors.

$2/5$

The following prepaid expenditure was incurred:

Rental of the switchboard system for head office for the period $1$ July $2023$ to $31$ January $2024$ was $46000($including VAT$).$

Deposit for the purchase of a motor car that will be delivered on $1$ June $2023$ amounted to $85000.-$ Insurance paid for the vehicle above was R$17328($including VAT$)$ for the period $1$ June $2023$ to $31$ May $2024.$

A patent was purchased for R$28800$ on $18$ June $2023$ and a trademark was renewed at a cost R$31500.$

Office equipment to the value of R$14400$ was purchased and brought into use on $1$ November $2022.$ The Commissioner allows for this equipment to be written off over $4$ years on a straight$-$line basis.

Machinery was purchased on $1$ March $2022$ for R$450000$ and was brought into use the following month. The machine was not new and unused. On $1$ October $2022$ the machine was sold for R$300000$ as it was producing defective products.

An employee with a disability as defined and an NQF level $10$ qualification entered in a two$-$year learnership agreement with SMC on $1$ April $2021.$ The employee continued with the learnership agreement until $31$ March $2023,$ when he successfully completed it$.$

SMC had decided to take out a life policy for one of its directors. This policy satisfied all the conditions as prescribed by the Minister of Finance. The premiums paid were R$150$ a month from the $01$ October $2022.$

SMC paid the following annuities:

R$2000$ a month to the widow of a deceased employee for the entire $2023$ year of assessment. The employee was the bread winner in his family.

R$2500$ a month to Farhan, a former managing director. Farhan resigned as a director in $2020$ due to infirmity. He was a director from $2012$ to $2020.$

For the year ended $30$ June $2022,$ SMC had an assessed loss of R$159500.$ The company does not have any assessed capital loss from previous years.

Provisional tax of R$396000$ was paid for the year.

$3/5$

REQUIRED:

$^$

Calculate the tax liability of SMC $($Pty$)$ Ltd for the year of assessment ended $30$ June $2023.$ Where an amount does not affect the taxable income calculation, provide a brief reason. Round off to the nearest rand and use a $27\%$ tax rate. Show all workings.

$(50)$

Hint: Your answer should be in a table format with three columns: description, notes and amount.