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BEL300 Assignment (semester 2)
- Course
- BEL300 (BEL300)
- Institution
- University Of Pretoria (UP)
BEL300 Assignment (semester 2). 80% Worthy.
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To: Nedbank Group Limited135 Rivonia Road
Sandown Sandton
Gauteng
2196
25 August 2022
To whom it may concern,
Tax implications of transactions provided.
Background
Nedbank Group Finance has different divisions; the one applicable in this situation is Group Tax.
They ensure Nedbank Group is compliant with all regulations regarding tax and they have a very
diverse background. Their planning is important so that their commercial and economic activities are
aligned.
One of the smaller stock broking business units trades in selected shares on behalf of clients and
Nedbank Group they have provided:
*Share Register
*Trade summary
For which the trade summary relates only to the year ended February 2022 in which the shares are
owned by Nedbank Group.
©2022 Mr. Bcom
, Introduction
The stockbroking business is trading on behalf of Nedbank Group thus the person liable for tax is
Nedbank Group. Nedbank Group purchases and sells shares, in the form of trading stock. For VAT
purposes the supply of shares is an exempt supply where the purchaser and seller are registered VAT
vendors (listed in VAT Act s12), therefore as Nedbank, SASOL, Vodacom, and Aspen Pharmacare are
registered VAT vendors there will be no VAT implications.
Trading stock is defined in S1 of the Income Tax Act (Hereafter referred to as ITA) as anything
acquired by the taxpayer for sale by the taxpayer or on behalf of the taxpayer. Thus the shares that
Nedbank Group holds are seen as Trading stock according to the definition stated above.
Trading stock consists mainly of 3 components namely
1. Opening stock
Opening stock is explained in the ITA in S22(2) as the amount (value) of any Trading stock
held and not disposed of at the beginning of any year of assessment.
Opening stock can be deducted at the beginning of every year of assessment under S11(a) of
the ITA, which states that any expenditure incurred in the production of income, provided
that such expenses are not capital in nature, is allowed as a deduction from the taxable
income of the taxpayer.
2. Closing stock
Closing stock is explained in S22(1) of the ITA as the amount (value) of any Trading stock
held and not disposed of at the end of the year of assessment.
Which will be taken into account, included in the taxable income of the taxpayer, at the end
of every year of assessment, as the amount of trading stock not disposed of during the year.
3. Purchases
Purchases will be allowed as a deduction from the taxpayer’s income according to S11(a) of
the ITA, which states that any expenditure incurred in the production of income is allowed
as a deduction from the income of the taxpayer, provided that such expenditures are not
capital in nature.
The value at which the Trading stock is included or deducted in terms of S22(3) of the ITA, is
the cost incurred in acquiring trading stock plus any further cost incurred to get the trading
stock in the condition and to the location but excluding any exchange differences.
From the information provided in the share register, Nedbank has an opening stock of 107
000 shares.
Movements occurred during the year, which will be analyzed and explained below.
• The first transaction is provided in the trade summary. Nedbank Group acquired
shares in Aspen Pharmacare on 1 June 2021, which can be deducted under s11(a) of
the ITA. The value of the 1000 shares will be determined by multiplying it by the
market value of a share on the purchase date.
According to https://simplywall.st/stocks/it/tech/bit-sit/sit-shares the market value
on 1 June 2021 for Aspen Pharmacare was R 164.85.
1000*R164.85= R164 850. Thus R164 850 may be deducted from the taxpayer’s
income.
©2022 Mr. Bcom
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