Please ignore value added tax (VAT) for the purpose of this question. Lebohang Tsheng is 42 years old and a resident of South Africa. He owns a small soap business and sells branded soaps to guesthouses and hotels. The Commissioner considers the process of manufacturing soap to be similar to that of manufacturing for taxation purposes. To maintain high quality standard of his products Lebohang created a Standard Operating Procedure (SOP) document for his business. As part of his SOP he assess the efficiency of all his assets formally once every three years, and informally whenever the need arises. After concluding his assessments on several assets during the 2020 year of assessment Lebohang disposed and acquired assets as follows: 1. A machine used to manufacture guest soap was sold for R180 000 on 30 October 2019. The second hand machine was originally acquired on 01 November 2016 for R350 000 and was brought into use in his process of manufacture on the same date. The machine was replaced with a new and unused machine on 01 November 2019 at a cost of R485 000. The new machine was brought into use in his process of manufacture on the same day. 2. Lebohang’s customers are spread across the Free State Province and that posed a major challenge on Lebohang’s lead-time for deliveries. Lebohang’s father donated a delivery vehicle to his son on the 01st of June 2018. The market value of the vehicle was R235 000 on the day it was donated. The delivery vehicle was brought immediately into use. The delivery vehicle was sold for R75 000 on 29 February 2020. Subsequent to the disposal this delivery vehicle, Lebohang bought a new delivery vehicle at the cost of R375 000 on the 29th of February 2020. The new delivery vehicle was never brought into use in the 2020 year of assessment. 3. A machine used to manufacture shampoo was sold for R100 000 on 01 November 2019. The new and unused machine was originally acquired on the 31st of October 2018 for R300 000 and was immediately brought into use in Lebohang’s process of manufacture. The machine was replaced with a new and unused on 01 November 2019 at a cost of R355 000. The new machine was brought into use in the manufacturing process on the same day. 4. Lebohang sold two old computers on the 29th of February 2020 at R2 100 each. This computers were both acquired on 01 March 2017 at a cost of R4 500 each and was immediately brought into used. 5. The manufacturing building in which Lebohang manufactures his soaps was erected by him during the 2011 year of assessment at a cost of R780 000. During the 2018 year of assessment he extended the building at cost of R55 800, which increased the industrial capacity of the manufacturing building. 6. During the 2019 year of assessment Lebohang wrote-off irrecoverable debts that amounted to R12 300. However, on a lighter note he managed to recover R5 600 from Pelontle Guesthouse which was written-off as bad debt two (2) years prior to the current year of assessment. 7. During the 2020 year of assessment Lebohang calculated a provision for doubtful debt balance of R20 000 for accounting purposes based on his debtors age analysis. Included on the R20 000 is an outstanding debt of R4 500 for debtors who have been in arrears for a period of less than 61 days. Lebohang does not have outstanding debtors of more than 120 days. In the previous year of assessment, SARS had allowed a section 11(j) allowance of R1 360. 8. Total sales for the year amounted to R2 150 000. The following straight-line write-off periods are allowed in terms of Interpretation Note 47: Delivery vehicles 4 years Computers 3 years Question: List the requirements that need to be present for a building to qualify for a section 13(1) allowanc
Please ignore value added tax (VAT) for the purpose of this question.
Lebohang Tsheng is 42 years old and a resident of South Africa. He owns a
small soap business and sells branded soaps to guesthouses and hotels.
The Commissioner considers the process of manufacturing soap to be
similar to that of manufacturing for
To maintain high quality standard of his products Lebohang created a
Standard Operating Procedure (SOP) document for his business. As part of
his SOP he assess the efficiency of all his assets formally once every three
years, and informally whenever the need arises.
After concluding his assessments on several assets during the 2020 year of
assessment Lebohang disposed and acquired assets as follows:
1. A machine used to manufacture guest soap was sold for R180 000 on
30 October 2019. The second hand machine was originally acquired
on 01 November 2016 for R350 000 and was brought into use in his
process of manufacture on the same date. The machine was replaced
with a new and unused machine on 01 November 2019 at a cost of
R485 000. The new machine was brought into use in his process of
manufacture on the same day.
2. Lebohang’s customers are spread across the Free State Province and
that posed a major challenge on Lebohang’s lead-time for deliveries.
Lebohang’s father donated a delivery vehicle to his son on the 01st of
June 2018. The market value of the vehicle was R235 000 on the day
it was donated. The delivery vehicle was brought immediately into use.
The delivery vehicle was sold for R75 000 on 29 February 2020.
Subsequent to the disposal this delivery vehicle, Lebohang bought a
new delivery vehicle at the cost of R375 000 on the
29th of February 2020. The new delivery vehicle was never brought into
use in the 2020 year of assessment.
3. A machine used to manufacture shampoo was sold for R100 000 on
01 November 2019. The new and unused machine was originally
acquired on the 31st of October 2018 for R300 000 and was
immediately brought into use in Lebohang’s process of manufacture.
The machine was replaced with a new and unused on
01 November 2019 at a cost of R355 000. The new machine was
brought into use in the manufacturing process on the same day.
4. Lebohang sold two old computers on the 29th of February 2020 at
R2 100 each. This computers were both acquired on 01 March 2017
at a cost of R4 500 each and was immediately brought into used.
5. The manufacturing building in which Lebohang manufactures his
soaps was erected by him during the 2011 year of assessment at a
cost of R780 000. During the 2018 year of assessment he extended
the building at cost of R55 800, which increased the industrial capacity
of the manufacturing building.
6. During the 2019 year of assessment Lebohang wrote-off irrecoverable
debts that amounted to R12 300. However, on a lighter note he
managed to recover R5 600 from Pelontle Guesthouse which was
written-off as
assessment.
7. During the 2020 year of assessment Lebohang calculated a provision
for doubtful debt balance of R20 000 for accounting purposes based
on his debtors age analysis. Included on the R20 000 is an outstanding
debt of R4 500 for debtors who have been in arrears for a period of
less than 61 days. Lebohang does not have outstanding debtors of
more than 120 days.
In the previous year of assessment, SARS had allowed a section 11(j)
allowance of R1 360.
8. Total sales for the year amounted to R2 150 000.
The following straight-line write-off periods are allowed in terms of
Interpretation Note 47:
Delivery vehicles 4 years
Computers 3 years
Question:
List the requirements that need to be present for a building
to qualify for a section 13(1) allowance.
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