INSTITUTE OF BUSINESS AND ACCOUNTING STUDIES (IBAS)

DIPLOMA

MAY 2024 ASSIGNMENT QUESTIONS

TAX LAW AND PRACTICE

SUBMISSION DEADLINE: 03 MAY 2024

INSTRUCTIONS TO CANDIDATES

This paper is based on the legislation applicable as at year of assessment ended 31 December
2019 unless stated otherwise, or where the question is specific to any year.

All four (4) questions must be attempted.

Marks will be awarded for all workings.

Mark Allocations

Question 1 22 marks

Question 2 20 marks

Question 3 30 marks

Question 4 28 marks

Total 100 marks

Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 1
Question 1

Franklin Services (Private) Limited (FS) has tentatively recruited an experienced senior
consultant from South Africa for a period of one year, in an effort to enhance its profile in
the advisory services market in Zimbabwe. The company is working out the modalities of
engagement with the consultant and are considering the following two options:

(a) Option 1:

Engage her as an independent consultant under the following conditions:

- She would be paid a gross monthly fee of $ 2,000 on the basis of the monthly
invoices she would be expected to raise on FS.
- She would be supplied with a fully furnished office, a personal assistant and a
laptop, as well as a company expensed motor vehicle for use.
- She would work under the supervision of the Chief Executive Officer of FS.
- She would be expected to report for duty from 8.00am to 5.00pm during
weekdays.
- She would be responsible for her own personal taxes. (5 marks)

(b) Option 2.

The second option is to engage her under similar terms but as an employee.
(5 marks)

Note: The Company has to appraise the Senior Consultant of her potential tax obligations
as she is unfamiliar with the tax requirements in Zimbabwe.

Required:

Review the above two options and summarise the key tax considerations for both the
consultant and the company. (12 marks)
[Total: 22 marks]

Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 2
Question 2

Mr Lifa disposed his entire 20% shareholding in Modern Weldings (Pvt) Ltd for a gross
sales amount of $20,000 during the financial year ended 31 December 2019. He had
acquired half of the shareholding in 2008. The second half of the shareholding was
acquired in 2015 for $500.

Required:

(a) (i) Calculate the capital gains tax payable in relation to the shareholding acquired in
2008. Assume that the sales proceeds for the shareholding acquired in
2008 are equal to 50% of the total gross sales amount realised. (6 marks)
(ii) State what allowances and the actual amounts that Mr Lifa is able to
deduct against the disposals of the shareholding relating to the shares
acquired in 2015. (6 marks)

(b) State the rate of withholding tax applicable on the disposal of immovable property
acquired prior to 1st February 2009. (4 marks)

(c) State the final rate of capital gains tax applicable on unlisted shares acquired after 1 st
February 2009. (4 marks)
[Total: 20 marks]

Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 3
Question 3

Malcom Gambiza owns a farm in Chimanimani. The following are the costs that he
incurred during the year ended 31 December 2019:

2019

ZWL

Staff house 16,000

Borehole Equipment 7,000

Sinking of boreholes and wells 12,000

Wages 5,000

Dam Construction 3,000

Clearing and land preparation 1,000

Fencing 25,000

Temporary farm roads 8,000

Malcom acquired the following cattle during the year,

ZWL

40 dairy cows 60,000

15 heifers 10,000

10 steers 5,000

3 bulls 3,000

5 tollies 1,500

4 Calves 500

80,000

During the year ended 31 December 2019, a total of 5 steers and 2 heifers were sold. 7
of the dairy cows died and from the period June 2019 to December 2019, 16 births
occurred. The approved fixed standard value of steers and heifers is ZWL 300 and
350 respectively. 2 calves became tollies. Calves are valued at ZWL 150 each while the
dairy cows, tollies and the bulls are valued at the purchase price. 2 steers were
slaughtered at a graduation ceremony of Malcolm’s son. Market values of steers and
heifers are ZWL 390 and calves ZWL 200.
Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 4
Additional Information
The following assets are acquired during the course of the year:

Water bowser 9,000

Farm equipment 31,000
1, 5 tonne truck 75,000
Nissan twin cab 35,000

Required:

a) List the deductions available to Malcom in terms of the seventh schedule for the year ended
31 December 2019. [10 marks]

b) Calculate the capital allowances which Malcom is entitled to for the year. Assume he wishes
to maximise all allowances. [12 marks]

c) Calculate the value of the closing stock. [8 marks]

[Total: 30 marks]

Question 4

Mr. Gunda aged 56 and employed as a Supervisor by a manufacturing company, Seiks

Manufacturing, received the following income during the tax year ended 31 December 2019:-
$
Basic Salary 25,000
Other allowances 4,000
Bonus 3,000
Long term services award 10,000
Cash in lieu of leave 3,000
45,000

Other Information

1. Mr. Gunda was entitled to the use of a company car with an engine capacity of 2,500cc
throughout the tax year.
2. Seiks Manufacturing contributed 100% of Mr Gunda’s CIMAS medical aid scheme
amounting to $3,600.
3. Mr Gunda contributed $2,000 towards his employer’s approved Pension Fund during the
tax year. He also contributed $294 towards the National Social Security (NSSA).
4. On 31 December 2015 Seiks Manufacturing offered Mr Gunda an offer to buy the company
car that he was driving at a price that was $ 2,000 below the market value of the car at the
date of sale. Mr Gunda accepted the offer.

Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 5
5. During the tax year ended 31 December 2015. Mr Gunda further received rental income of
$15,000 from the letting of a house that he owns in a high density suburb situated in
Zambia.
6. Mr Gunda bought drugs of $6,000 on prescription for his wife and himself during the tax
year.
7. You are told that the above covers Mr Gunda’s total income for the tax year ended 31
December 2015.

Required:

a) Calculate Mr. Gunda’s minimum tax liability for the tax year ending 31 December 2015.
[20 marks]

b) Specify any income that is not taxable and state in brief the reasons in each case. [8 marks]
[Total: 28 marks]

END OF ASSIGNMENT QUESTION PAPER

Diploma Level:
Tax Law and Practice: Assignment Question Paper: May 2024 Page 6