LML4804
Assignment 3 Semester 2 2026
Unique number:
Due date: 8 September 2026
QUESTION 1: Impermissible Avoidance Arrangement
Section 80A of the Income Tax Act 58 of 1962 contains the general anti-avoidance
rule for an impermissible avoidance arrangement. SARS must identify an
arrangement, a tax benefit, a sole or main purpose of obtaining that benefit, and at
least one tainted feature listed in section 80A.1 The Constitutional Court has
confirmed that sections 80A to 80L must be applied to the actual arrangement
proved on the facts.1
, QUESTION 1: Impermissible Avoidance Arrangement
Section 80A of the Income Tax Act 58 of 1962 contains the general anti-avoidance
rule for an impermissible avoidance arrangement. SARS must identify an
arrangement, a tax benefit, a sole or main purpose of obtaining that benefit, and at
least one tainted feature listed in section 80A.1 The Constitutional Court has
confirmed that sections 80A to 80L must be applied to the actual arrangement
proved on the facts.2
The first requirement is an arrangement. Section 80L gives this term a wide meaning
and includes a transaction, operation, scheme, agreement or understanding,
whether enforceable or not.3 Yaya's purchase and later sale of the shares in
Themba-Bread, can therefore be examined as part of one wider scheme. Ovenstone
v SIR supports examining the substance and connected steps of a tax-avoidance
scheme rather than looking at one transaction in isolation.4
Secondly, there must be a tax benefit, which includes the avoidance, postponement
or reduction of tax liability.5 Themba-Bread used R1 million of its assessed loss
against taxable income and carried the remaining R500 000 forward. The company
therefore paid less tax than it would have paid without the assessed loss. In CSARS
v Woulidge, the court accepted that an arrangement may be legally effective while its
tax consequences are still determined under tax law. 6
Thirdly, the sole or main purpose must be to obtain the tax benefit. Section 80G
presumes a tax-avoidance purpose where an arrangement results in a tax benefit,
unless the taxpayer proves that tax avoidance was not the sole or main purpose. 7
Yaya should therefore provide proper commercial reasons for buying Themba-Bread
and later selling the shares to Owethu. A genuine commercial purpose can be
important when deciding whether the arrangement crosses the line into
impermissible avoidance.8
1
Income Tax Act 58 of 1962 s 80A.
2
Absa Bank Ltd and Another v Commissioner for the South African Revenue Service [2026] ZACC 15.
3
Income Tax Act 58 of 1962 s 80L.
4
Ovenstone v Secretary for Inland Revenue 1980 (2) SA 721 (A).
5
Income Tax Act 58 of 1962 ss 80A and 80L.
6
Commissioner for the South African Revenue Service v Woulidge 2002 (1) SA 68 (SCA).
7
Income Tax Act 58 of 1962 s 80G.
8
Commissioner for Inland Revenue v Louw 1983 (3) SA 551 (A).
Assignment 3 Semester 2 2026
Unique number:
Due date: 8 September 2026
QUESTION 1: Impermissible Avoidance Arrangement
Section 80A of the Income Tax Act 58 of 1962 contains the general anti-avoidance
rule for an impermissible avoidance arrangement. SARS must identify an
arrangement, a tax benefit, a sole or main purpose of obtaining that benefit, and at
least one tainted feature listed in section 80A.1 The Constitutional Court has
confirmed that sections 80A to 80L must be applied to the actual arrangement
proved on the facts.1
, QUESTION 1: Impermissible Avoidance Arrangement
Section 80A of the Income Tax Act 58 of 1962 contains the general anti-avoidance
rule for an impermissible avoidance arrangement. SARS must identify an
arrangement, a tax benefit, a sole or main purpose of obtaining that benefit, and at
least one tainted feature listed in section 80A.1 The Constitutional Court has
confirmed that sections 80A to 80L must be applied to the actual arrangement
proved on the facts.2
The first requirement is an arrangement. Section 80L gives this term a wide meaning
and includes a transaction, operation, scheme, agreement or understanding,
whether enforceable or not.3 Yaya's purchase and later sale of the shares in
Themba-Bread, can therefore be examined as part of one wider scheme. Ovenstone
v SIR supports examining the substance and connected steps of a tax-avoidance
scheme rather than looking at one transaction in isolation.4
Secondly, there must be a tax benefit, which includes the avoidance, postponement
or reduction of tax liability.5 Themba-Bread used R1 million of its assessed loss
against taxable income and carried the remaining R500 000 forward. The company
therefore paid less tax than it would have paid without the assessed loss. In CSARS
v Woulidge, the court accepted that an arrangement may be legally effective while its
tax consequences are still determined under tax law. 6
Thirdly, the sole or main purpose must be to obtain the tax benefit. Section 80G
presumes a tax-avoidance purpose where an arrangement results in a tax benefit,
unless the taxpayer proves that tax avoidance was not the sole or main purpose. 7
Yaya should therefore provide proper commercial reasons for buying Themba-Bread
and later selling the shares to Owethu. A genuine commercial purpose can be
important when deciding whether the arrangement crosses the line into
impermissible avoidance.8
1
Income Tax Act 58 of 1962 s 80A.
2
Absa Bank Ltd and Another v Commissioner for the South African Revenue Service [2026] ZACC 15.
3
Income Tax Act 58 of 1962 s 80L.
4
Ovenstone v Secretary for Inland Revenue 1980 (2) SA 721 (A).
5
Income Tax Act 58 of 1962 ss 80A and 80L.
6
Commissioner for the South African Revenue Service v Woulidge 2002 (1) SA 68 (SCA).
7
Income Tax Act 58 of 1962 s 80G.
8
Commissioner for Inland Revenue v Louw 1983 (3) SA 551 (A).
