How often Small business corporations and micro businesses is asked

Where it was asked

• May/Jun 20142 marks
• Oct/Nov 201318 marks
• May/Jun 201325 marks

The questions

1. May/Jun 2014, Q4(b)2 marks

   XYZ Trust is a resident of the Republic of South Africa for tax purposes and its year of assessment ends on 28 February 2014. The trust holds several investments that produce interest and dividends, and also runs a business selling electric chainsaws. On 2 December 2013, XYZ Trust sold seven electric chainsaws in total to a timber company (the customer) for R14 000. XYZ Trust supplied the customer with a warranty against any mechanical failure of these seven chainsaws, meaning it will replace any faulty chainsaw free of charge; the warranty applies for a period of six months from the date of sale. XYZ Trust had originally purchased the chainsaws for R1 500 each from its supplier. At year-end, the auditors raised a warranty provision of R10 500 (debiting the warranty expense and crediting the provision). The accountant calculated the following amounts for the trust's 2014 year of assessment, which may be assumed to be correct: taxable income of R1 253 000; qualifying turnover of R1 798 000; and taxable turnover of R1 120 000. Give two reasons why XYZ Trust, described above, would not qualify as a micro business.

2. Oct/Nov 2013, Q2.15 marks

   Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. List the requirements that a company must meet in order to qualify as a small business corporation, as defined for the 2013 year of assessment.

3. Oct/Nov 2013, Q2.24 marks

   Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. Assuming Frutula (Pty) Ltd qualifies as a small business corporation, calculate its final tax liability for the year of assessment ended 28 February 2013.

4. Oct/Nov 2013, Q2.34 marks

   Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. Assuming instead that Frutula (Pty) Ltd qualifies as a micro business, calculate its tax liability for the year of assessment ended 28 February 2013.

5. Oct/Nov 2013, Q2.45 marks

   Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. Assuming Frutula (Pty) Ltd does not qualify as either a small business corporation or a micro business, calculate its final tax liability for the year of assessment ended 28 February 2013. In addition, calculate the second provisional tax payment that Frutula (Pty) Ltd should make and state the date by which this payment must be made to SARS.