Page 465 - SAIT Compendium 2016 Volume2

IN 48 Income Tax acT: InTeRPReTaTIon noTes IN 48
[a] = R171 000 × 100 / 114
[b] = (R150 000 × 114 / 100) × 15%; or R171 000 × 15% [c] = (R74 894 – R25 650) × 14 / 114
[d] = R74 894 – (R25 650 + R6 048)
[e] = R150 000 – R43 196
Note:
All the instalments are only due at least 12 months or more after the date of the agreement. Thus the requirement is met that at least 25% of the amount payable under the agreement must become due and payable at least 12 months after the date of the agreement.
Individual instalments received yearly from the debtor, as indicated under the column ‘Capital repayments’ will not form part of the company’s gross income for that particular year of assessment. This is because the whole amount of R150 000 has already been included in the company’s gross income in year 1 under section 24(1).
Individual amounts of VAT (output tax) under the column ‘VAT (output tax)’ will not be accounted for separately, since the total VAT output tax of R21 000 has already been accounted for according to section 27 of the VAT Act. Such individual amounts are not regarded as having been received by the company on its own behalf for its own bene t. Individual amounts of amortised nance charges under the column ‘Finance charges’ will form part of the company’s gross income at the end of each relevant year of assessment according to section 24J.
Gross pro t percentage = [(R150 000 – R100 000) / R150 000] × 100 = 331/3%
Calculation of taxable income of the company for the three years of assessment End of rst year of assessment
Sales (Gross income de nition – sections 1(1) and 24)
Cost [section 11(a)] (R114 000 × 100 / 114)
Interest accrued (section 24J)
Taxable income before debtors’ allowance under section 24(2) Debtors’ allowance – section 24(2) (R106 804 × 331/3%) Taxable income
End of second year of assessment
Interest accrued
Add back previous debtors’ allowance
Current debtors’ allowance (R57 128 × 331/3%) Taxable income
End of third year of assessment
Interest accrued
Add back previous debtors’ allowance Current debtors’ allowance (RNil × 331/3%) Taxable income
R 150 000
(100 000) 25 650 75 650 (35 601)
40 049
18 263
35 601 (19 043) 34 821
9 769 19 043 NIL 28 812
4.8 Calculation of gross pro t percentage on a globular basis
4.8.1 Introduction
Not all taxpayers have sophisticated accounting systems capable of handling an individual debtor-by-debtor determination of the gross pro t percentage and it is therefore necessary for SARS to accommodate globular methods which involve estimating the applicable gross pro t percentage to be applied to the instalment debtors outstanding at the end of a year of assessment (excluding bad and doubtful debts, VAT and nance charges). An important condition for accepting a globular method is that it must be consistently applied. It will be unacceptable to SARS if a taxpayer switches from one method to another simply to exploit the allowance. A switch would have to be made for a very sound reason, such as an upgrade to a computer system capable of determining the gross pro t percentage on an individual debtor-by-debtor basis.
4.8.2 The aged-debtors’ basis using applicable average gross pro t percentages
Apart from the individual debtor-by-debtor basis, another acceptable method is the aged-debtors’ basis. Under this method the outstanding debtors at the end of the year of assessment are aged and allocated across the years of assessment to which they arose. The applicable gross pro t percentage for each year of assessment is then applied to the debtors that arose during that year of assessment. Unlike the individual debtor-by-debtor basis, this method uses the average gross pro t percentage for a year of assessment. It is therefore not as accurate as the individual debtor-by-debtor approach but will be acceptable to SARS.
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