SOLUTION TO QUESTION 1 May/June 2015
FARMING FANATICS (PTY) LTD
VAT Payable/refundable 28 February 2015 (2 month period)
Part A
VAT Output
Sales zero rated -
Interest received (Exempt financial services) -
Loan repayment (Exempt financial services) -
Advisory services (150 000 x 15/115) 19 565
Indemnity payment - previous period -
Use of company car (327 000 x 100/115) x 0.6% x 15/115 x 1month 223
Total Vat output 19 788
VAT Input
Purchase of feed zero rated -
Fuel (Zero rated) -
Purchase truck (327 000 x 15/115) 42 652
Telephone expense 61
Salaries (not a supply) -
Purchase of chair & tables (10 000 x 15/115) 1 304
Total Vat input 44 018
Vat Refund (Vat output less Vat input) (24 230)
b) Deregistration
Output vat adjustment - Lower of
cost/mv x14/114
Truck 40 435
Furniture 652
Trading stock - zero rated -
Employee loan (exempt) -
41 087
Part b - Sale of a going concern
For a sale of a going concern to be zero rated the following criteria must be met;
1) Seller must be a VAT vendor
2) Purchaser must be a Vat vendor
3) All assets necessary for going concern must be supplied
4) tax invoice must have Vat at 0%
5) the agreement must state Vat at 0%
6) Agreement must state that it is s a going concern
As Hero (Pty) Ltd is not a Vat vendor there will be no Vat exemption on the sale of the going concern.
Therefore Vat at 15% will be charged on the sale by Naughty (Pty) Ltd.
FARMING FANATICS (PTY) LTD
VAT Payable/refundable 28 February 2015 (2 month period)
Part A
VAT Output
Sales zero rated -
Interest received (Exempt financial services) -
Loan repayment (Exempt financial services) -
Advisory services (150 000 x 15/115) 19 565
Indemnity payment - previous period -
Use of company car (327 000 x 100/115) x 0.6% x 15/115 x 1month 223
Total Vat output 19 788
VAT Input
Purchase of feed zero rated -
Fuel (Zero rated) -
Purchase truck (327 000 x 15/115) 42 652
Telephone expense 61
Salaries (not a supply) -
Purchase of chair & tables (10 000 x 15/115) 1 304
Total Vat input 44 018
Vat Refund (Vat output less Vat input) (24 230)
b) Deregistration
Output vat adjustment - Lower of
cost/mv x14/114
Truck 40 435
Furniture 652
Trading stock - zero rated -
Employee loan (exempt) -
41 087
Part b - Sale of a going concern
For a sale of a going concern to be zero rated the following criteria must be met;
1) Seller must be a VAT vendor
2) Purchaser must be a Vat vendor
3) All assets necessary for going concern must be supplied
4) tax invoice must have Vat at 0%
5) the agreement must state Vat at 0%
6) Agreement must state that it is s a going concern
As Hero (Pty) Ltd is not a Vat vendor there will be no Vat exemption on the sale of the going concern.
Therefore Vat at 15% will be charged on the sale by Naughty (Pty) Ltd.
