Page 603 - SAIT Compendium 2016 Volume2

IN 69 Income Tax acT: InTeRPReTaTIon noTes IN 69
A game farmer (see 4.1) is generally involved in the activity of breeding and running game on a farm for the purpose of marketing the live animals, hunting the animals for a fee or slaughtering the animals for meat. The game which is part of the farming operations clearly falls within the de nition of livestock discussed above and is accordingly considered to be livestock for purposes of the First Schedule. *
Animals which are not part of the farming operations, that is, animals which the farmer is not raising with the intention of exploiting commercially, will not fall within the scope of the First Schedule. For example, a game farmer may have hyenas, foxes or rodents on the farm which are not part of the farming operation and therefore do not fall within the provisions of the First Schedule.
Under paragraph 2 a game farmer must include in the return of income the value of all livestock ‘held and not disposed of’ at the beginning and end of each year of assessment. In the context of the First Schedule SARS interprets ‘held’ as referring to ownership.†
The question of ownership is particularly relevant to wild game because under the common law wild game are regarded as res nullius, that is, things owned by nobody but which can be owned. Ownership is established by taking control of the animal with the intention of being the owner. Typically in the game farming context this is achieved by erecting fences around the farm. The common law position has been modi ed by the Game Theft Act 105 of 1991. This Act ensures that a farmer remains the owner of game that escapes from the farm. ‘Game’ is de ned in the Game Theft Act as follows:
Section 2 of the Game Theft Act 105 of 1991 reads as follows:
‘game’ means all game kept or held for commercial or hunting purposes, and includes the meat, skin, carcass or any portion of the carcass of that game.
2 Ownership of game
(1) Notwithstanding the provisions of any other law or the common law—
(a) a person who keeps or holds game or on behalf of whom game is kept or held on land that is suf ciently enclosed
as contemplated in subsection (2), or who keeps game in a pen or kraal or in or on a vehicle, shall not lose
ownership of that game if the game escapes from such enclosed land or from such pen, kraal or vehicle;
(b) the ownership of game shall not vest in any person who, contrary to the provisions of any law or on the land of another person without the consent of the owner or lawful occupier of that land, hunts, catches or takes possession of game, but it remains vested in the owner referred to in paragraph (a) or vests in the owner of the land on which
it has been so hunted, caught or taken into possession, as the case may be.
(2) (a) For the purposes of subsection (1) (a) land shall be deemed to be suf ciently enclosed if, according to a
certi cate of the Premier of the province in which the land is situated, or his assignee, it is suf ciently enclosed to con ne to that land the species of game mentioned in the certi cate.
(b) A certi cate referred to in paragraph (a) shall be valid for a period of three years.
For the reasons discussed above, all game livestock is dealt with on revenue account as if it were oating capital.
4.3.2 Opening and closing stock
As noted above the value of closing stock is included in income and the value of opening stock is allowed as a deduction from income. The value of the livestock to be included in opening stock and closing stock is determined according to paragraphs 4 (opening stock) and 5 (closing stock).
Paragraph 5 (1) stipulates that the value to be placed on the livestock for purposes of the First Schedule shall be the standard value applicable to that livestock. The standard value of any class of livestock of a farmer is generally either—
• •
• •
•
the standard value of that class of livestock xed by regulation under the Act, or
another standard value adopted by the farmer (or company or the executor of the estate) when a particular class of livestock is adopted for the rst time and such value is within 20% of the standard values xed in the regulations or which, in certain circumstances, has been approved by the Commissioner.
Paragraph 4 (1) provides that the value of the opening stock will be—
the value of the closing stock at the end of the preceding year;
the market value of livestock acquired during the current year of assessment otherwise than by purchase, natural increase or in the ordinary course of the farming operations carried on, for example, by donation or inheritance; ‡ and the market value of livestock which was previously held, but not as part of the farming operations, becomes part of the farming operations. §
Note: Any opening stock still on hand at the end of the year of assessment must be included in the closing stock at its standard value and not market value.
The regulations do not x a standard value for game livestock. For the purpose of standard values the Commissioner accepts that game livestock may be allocated a standard value of nil. ¶
4.3.3 The cost of acquiring game
The cost price of game livestock acquired by a person carrying on farming operations may be claimed as a deduction under section 11 (a).
* Before 1 March 1999 SARS did not treat game as livestock for purposes of all the paragraphs of the First Schedule—see Income Tax Practice Manual [A:F14] read with Practice Note No. 6 of 1999 and Practice Note No. 27 of 1994 (withdrawn). † Various writers support this interpretation: see D Clegg and R Stretch Income Tax in South Africa LexisNexis, Durban in 19.3; D Meyerowitz Meyerowitz on Income Tax 2007–2008 The Taxpayer CC, Cape Town in 20.24; A P de
Koker Silke on South African Income Tax LexisNexis, Durban in § 15.10. ‡ Paragraphs 4(1)(a)(ii) and 4(1)(b)(ii).
§ Paragraphs 4(1)(a)(ii) and 4(1)(b)(ii).
¶ Paragraph 6(1)(b)(ii), (c)(ii) or (d)(ii) read with paragraph 6(3).
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