Question

Question 1 Andile Black, aged 45, is a South African resident. He owns a business that deals mainly with brick laying and distribution in Tugela Ferry. The business has two trucks that are used for the distribution of bricks to clients. Andile hired two truck drivers and six general workers. The following expenditure were incurred by Andile on behalf of his business during the 2019 year of assessment: 1. One of his trucks was involved in an accident while delivering bricks to a client. The accident resulted in the injury of two employees and they had to be admitted to a local hospital. Due to this incident, Andile paid R70 000 medical costs on behalf of his employees that were involved in accident. 2. Andile incurred a cost of R30 000 to acquire a vacant land that he requires for parking purposes for the clients of his business. He also currently has no warehouse to store finished bricks and rents the space from Makhubo at a fee of R2 000 on a monthly basis. In addition to the monthly rental fee, Andile is required to pay Makhubo a 1% rental fee of the annual revenue for the period of 1 May 2018 to 30 April 2019 only if his annual revenue exceeds R550 000. Andile’s business made a revenue of R630 000 for the period 1 May 2018 to 30 April 2019. 3. Andile paid an amount of R120 000 for salaries and wages of his employees. Andile erected a billboard (costing R35 000) on the pavement next to his business premises for advertisement purposes of his business. He also paid a total advertisement fee of R40 000 to the local newspaper for the advert of his business that will appear on the every Monday’s newspaper. He never consulted with the local municipality before he erected the billboard. The municipality instructed him to remove the billboard because it was obstructing pedestrians. He was fined R8 000 by the municipality for this. He also paid R2 000 for the billboard to be removed and put inside his business premises. MODULE TAXATION 2A TOTAL MARKS 60 MARKS 1 REQUIRED: In terms of the general deduction formula, discuss the deductibility of each expenditure incurred by Andile Black for his business for the current year of assessment. Quote relevant case law to support your argument. my subject is Taxation 2a

Answer 1

LIST OF EXPENSES MADE BY MR. ANDILE BLACK FOR HIS BUSINESS
SL NO.	PARTICULAR OF EXPENSES	AMOUNT ( R)
1	EMPLOYEE HOSPITALIZATION COST	70000
2	PARKING COST	30000
3	RENT MONTHLY	24000
4	1% OF RENTAL FEE IF ANNUAL REVENUE EXCEED 550000	240	TURNOVER TAXES 5500+ AMOUNT EXCEED OF 500000
5	SALARY AND WAGES	120000
6	ADVERTISEMENT	35000
7	TOTAL ADVERTISEMENT FEES FOR LOCAL NEW PAPER	40000
8	FINE TOWARDS CAPTURING PEDESTRIAN	8000
9	BILLBOARD REMOVING COST	2000
	TOTAL EXPENDITURE DURING THE YEAR	329240
	As per the South African tax system as it applies to all forms of income, general deductions and all classification of taxpayers.
	Income Tax Act, as it applies to the calculation of special deductions, capital allowances and capital gains tax for business entities
	There are two types of tax involve one is central govern through SAARC and other one local government.
	Central collected from :
	- income tax
	- corporate tax
	Local govern collected from \municipal Tax
	Let us express briefly each expenses deductibility of each expenditure:
	MEDICAL AND HOSPITALIZATION.
	Certain limited expenses may be deducted by employees from their employment income.
	Such expenses include business-related travel, automobile, and entertainment expenses
	with the amount that is deductible by an employee also being limited to the amount of the relevant allowance that is
	granted to the employee by their employer
	SALARY AND WAGES
	Money can only be taken off an employee’s salary if he agrees to it, or if the employer is legally obliged to do so. This is normally in the
	This is normally in the form of a collective agreement, a written agreement with the employee, legislation or a court
	of Employment Act 75 of 1997) (BCEA) , (Section 34 of the Basic Conditions
	All the costsincurred in generating the rental income can be deducted when calculating taxable income
	ADVERTISEMENT
	if a company incurs CSR expenditure with the dual purpose of advertising its products
	This expenses relating to the advertisement should be tax deductable if the requirement of business
	u/s 18 A
	FINE TO THE MUNICIPALITY
	which constitutes a fine charged or penalty imposed as a result of an unlawful ... including South Africa, prohibit the tax-deductibility .
	PARKING EXPENSES
	[24] SARS disallowed IT deductions and VAT input tax deductions in respect of
	payments allegedly made as rentals to a landlord in respect of an additional parking
	space leased by the tax payer. If ther is a dispute that a parking area was rented there should be
	sufficient proof that the claim expenditure had in fact been incurred as perking payment.