1ST QUARTER 2008 VOLUME 10

CELEBRATING OUR
INTERNATIONAL AFFILIATION
Cameron & Prentice has recently been appointed by Russell Bedford
International as the network’s first member firm in Cape Town.

of professional services firms with

a wealth of practical commercial
experience.

In addition, Russell Bedford

Russell Bedford International is
a global network of independent
accountancy firms, business
consultants and specialist legal
advisors. It is currently represented
by 200 offices in more than 70
countries in Europe, the Americas,
Middle East, Africa, Indian Sub-
Continent and Asia-Pacific.
Established 25 years ago in 1983,
the Russell Bedford International
network specialises in helping
companies meet the challenges that
international business expansion
presents.
Our membership of the Russell
Bedford International network will
provide our clients with access to a
truly global worldwide network
International has recently been
named one of the first full members
of the Forum of Firms, along with
16 of the world’s leading audit
networks, after passing all the
Forum’s membership tests.
The Forum of Firms is an association
of international networks of
accounting firms. These firms
perform audits of financial
statements that are or may be used
across national borders. The Forum’s
goal is to promote consistent and
high quality standards of financial
reporting and auditing practices
worldwide.

Continued inside

WHAT’S IN
URBAN DEVELOPMENT
Getting a tax allowance facelift

COMPANY CAPITAL TAX ASSETS

Get a little tax planning

INVEST IN YOUR STAFF

Improve your client service

USUFRUCT EXPLAINED
How you can save on estate duty

UNDER THE RADAR

Tax reporting obligations

ED’S DESK
There is so much change in the air.
Sure, it’s the change of season and
we are thinking about switching
from the air conditioner to the
heater, but actually it’s more than
that. There are plenty of different
things going on at the moment that
affect the way we work, how we
work and our futures.
One thing’s for sure, our future at
Cameron & Prentice is looking very
exciting. Our cover story about our
new affiliation with Russell Bedford
is something we are proud of.
And although it will herald change
throughout our office, the change
will not affect the way we do
business with our clients.
Short-changed by Eskom, the
looming load shedding will prove
tiresome to us all, but systems are
in place to deal with anything Eskom
throws at us. We may get stuck in
traffic or a lift but our motto is and
will remain - “maintain our high
productivity, service standards and
take the stairs whenever possible!”
In this issue of Ampersand, David
Warneke examines a number of tax
issues that need close attention,
while Audit Clerk, Alexander Segall,
suggests a little staff training. Peter
Prentice’s wise words on estate
planning can be found, as usual, on
the back page.
Eskom has requested that we all
reduce our electricity usage by 10%.
We suggest you take half an hour,
sit in the sun, load up on vitamin D
and read this issue of Ampersand.
It’s amazing how energised you’ll
feel after that.
Ed
IN BRIEF
VAT registration threshold
It was announced in the recent budget that the compulsory VAT reg-
istration threshold will be increased from the current annual turnover
level of R300 000 to R1 million. The effective date of this change will
be known once the legislation is approved by Parliament. This change
will allow registered vendors, whose annual taxable supplies are below
the turnover level of R1 million and who may benefit from not being
required to charge VAT on their supplies, to de-register for VAT pur-
poses.
Annual returns for CC’s
CIPRO has announced that annual returns for CC’s will be introduced
with effect from 1 May 2008. CIPRO states that the reason for in-
troducing annual returns for CC’s is to enable the Registrar of Close
Corporations to determine whether a registered organisation is still in
business and to confirm that the Registrar is in possession of the latest
information of the CC. The CIPRO fee for a CC with a turnover of less
than R50 million will be R100 per annum whilst a CC with a turnover of
greater than R50 million will pay a CIPRO fee of R4 000.
Revised film and television production incentive
The revised film production incentive, which is intended to increase
local content generation and improve location competitiveness for
foreign film productions in South Africa, came into effect on 1 February
2008. To find out more about the incentives visit the DTI website at
www.thedti.gov.za/film/filmincentive.htm.
100% pass rate
Congratulations to Lara Forsyth and Gary Isbister who recently wrote
and passed the Public Practice Exam.
It’s worth speaking out
In an effort to ensure outstanding service we operate a complaints
register. Complaints are recorded via the Partners’ personal assis-
tant, Amber and submitted for their attention. To register a complaint,
please email amber@campren.co.za
Continued from cover
We see our membership of Russell Bedford International as an exciting
development and one that we are equipped and energised for. It is a
fantastic opportunity for all involved.
Our staff have accumulated a wealth of experience and are excited
about our international affiliation and the future career opportunities and
experiences this relationship can provide them. Our clients will benefit from
the advantages that our membership of a respected global network brings,
such as access to professionals worldwide and continued improvement and
monitoring of internationally accepted quality control standards.
ARE YOU DELIVERING
A CUTTING EDGE SERVICE?
It is simply not possible to deliver a service which is of an adequate standard if you
do not invest in the development of your most important asset – your staff and the
resources with which they are provided to perform a service. Audit Clerk,
Alexander Segall explains the process and benefits.

Training leads to value. As a result, Cameron & Prentice

But how does this happen? has a policy of technical training
for its staff at accredited training
Firstly the main objectives of
institutions.
any service business need to be
identified:
The process of adding
value is two-fold:
1. To provide the best possible
1. Work is performed more
service to its clients.
efficiently for clients; and
2. To train the staff employed so
2. Services received are up-to-date
that they learn the skills needed
with the latest technical
“Give me six hours to to progess through the
standards and legislatory
organization.
chop down a tree, and requirements.

I will spend the first Naturally, these 2 processes of
four sharpening the providing services and training
staff are interlinked as the business
axe.” cannot provide its clients with the
services they need, unless the firm
- Abraham Lincoln
invests in the technical training of
its staff on an ongoing basis.
It is in this spirit that Cameron
& Prentice strives to achieve
excellence in service delivery and
add value to its clients through
training, innovation and creativity
and in turn, deliver a cutting
edge service.

A LITTLE-KNOWN
TAX REPORTING OBLIGATION
It is not generally known that in terms of the Income Tax Act (section
70), every company has to furnish a return to SARS reflecting interest
paid by it during the 12 months from March to February of each year.
David Warneke explains just what’s involved.

As recently pointed out in
“Integritax”, the tax magazine of the
South African Institute of Chartered
Accountants, this return has to
cover interest due by the company
in respect of loans, advances and
debentures. Importantly, it therefore
covers interest bearing inter-
company loans. This return has to
reflect the lender’s name, address
and identity number, or in the case
of a juristic person, the registration
number. It must be submitted to
SARS within 30 days of the end of
February, or within such extended
period as SARS may allow.
The reporting obligation only applies
to companies (the definition of
“company” in the Income Tax Act
includes a close corporation) – not
trusts. Since companies with a
February year end are often only in
a position to know the amount of
interest that they have incurred well
after their year ends and around the
time of the audit, an extension has
to be applied for.
The above section also imposes a
similar duty in respect of dividends
distributed by companies during the
same period of each year.
TAXPAYER-FRIENDLY ALLOWANCE FOR
BUILDINGS IN URBAN DEVELOPMENT
ZONES IS EXTENDED
A tax allowance for buildings in urban development zones is
under renovation. David Warneke puts on his hard hat and
examines section 13quat of the Income Tax Act which grants
income tax allowances to owners and lessors of buildings
situated in the so-called ‘urban development zones’.

Created to encourage renewal of

our inner cities, the allowances
are generally based on the cost of
refurbishment or construction and
may be written off against taxable
income over a 5 or a 17 year period,
depending on whether the building
is refurbished or a new building
constructed, respectively. Various
requirements must be met before
the allowance will be granted.

However an interesting twist to

the section is that a taxpayer who
purchases a qualifying building
or parts of such a building from a
developer, may also claim a tax
write off of portion of the purchase
cost of the building. The amount of
the write off depends on whether
the building is refurbished or new.

Where the building is refurbished,

the write off is 6% per annum
straight-line for a total of 5 years
i.e. a total write off of 30% of the
purchase cost of the building. Where
the building is new, the write off is
11% for the first year and 2.75%
per annum straight line for the
following 16 years i.e. a total write
off of 55% of the purchase cost of
the building. Various requirements
must be met before the allowance
will be granted, one of which is that
the developer must not also be
claiming a section 13quat allowance
on the building.
This means that a taxpayer due to expire in 2009 but is set to
who purchased a qualifying new be extended for a further 5 years,
apartment in such a development as announced in Minister Manuel’s
for the purpose of renting it out recent budget speech.
would be able to claim 11% of the
It must however be borne in mind
cost of the apartment in the first
that the section 13quat allowance
year, in addition to the finance
is subject to recoupment if the
charges and other expenses
building or part thereof is sold for
normally allowed in the production
more than its tax value.
of the rental income.
This can greatly benefit the
taxpayer’s cashflow position. Good
news is that the allowance was
 A WORD OF ADVICE
Keeping it clean
Doing business by the book benefits
both your business and your
customers. While all businesses
have a duty to act lawfully, there
are more practical reasons as to
why compliance is important. For
example, businesses that comply
with the law will avoid:

Investigation – which in
turn may require significant
management input.

Penalties – depending on the

nature of the transgression,
severe financial penalties may
be implemented.

Agreements – “under the

table” businesses run the risk of
agreements being rendered void
and unenforceable.

URGENT TAX Adverse publicity – bad news

travels fast but is slow to be
forgotten.

PLANNING NECESSARY Law suits – the possibility

If your company owns a capital asset
that was acquired before 2001, David
Warneke reveals a change that may call
of being sued for damages
by those harmed by unlawful
behaviour is a very real concern.
Now that we’ve looked at the cons
lets take a look at the pros. There
are many competitive advantages to
keeping operations above board:

for urgent tax planning. Forge stronger business

Where companies hold capital
assets that were acquired before
2001, cognizance must be taken of
the fact that the dividend definition
will change with effect from 1
January 2009.
At present, only the post 2001
portion of the increase in value of
the asset is subject to secondary
tax on companies (at 10%) where
the asset is disposed of and the
proceeds distributed to shareholders
in anticipation of liquidation or
deregistration.
However for distributions taking
place on or after 1 January 2009,
the full profit on disposal will
be subject to secondary tax on
companies.
Therefore, if your company is
planning to dispose of such an asset
at some point, it is worthwhile to
consider doing it before 1 January
2009 (which is, of course, around
the corner) and then deregistering
the company.
It is also important to remember
that, not only must the asset be
disposed of, but the proceeds will
have to be distributed and an
application made to deregister the
company, all before this date, in
order for the new rules not to apply.
I suggest you get moving!
relationships – by successfully
protecting the integrity and
privacy of sensitive data, a
powerful message is sent out
to your customers, partners
and employees about the
trustworthiness of your
business. This in turn increases
customer loyalty and improves
your company’s competitive
advantage.
Increased trust – likewise,
transparent cost structures
inspire customer confidence and
loyalty.
Freedom to concentrate on
core business – making lawful
business practice a sustainable
part of everyday operations is a
source of business opportunity
in itself. When compliance is
easily managed, it frees up
resources that can then be
re-focused on core business
functions.
UNDERSTANDING USUFRUCT
A usufruct, derived from the Latin words usus and fructus, refers to the
holder’s legal right to use, for profit or otherwise, property belonging to
another person. Peter Prentice demonstrates how a usufruct may
be effectively used to reduce estate duty payable.

Jack aged 70 and Jill aged 65, a
couple married out of community
of property, had a son Charles
aged 35. Jack owned assets with
a market value of R8 million which
included their holiday home with
a value of R5 million. Jill’s assets,
mainly investments, had a market
value of R2 million.
Jack, after formulating an estate
plan, registered a usufruct over
their holiday home which allowed
Jill the full and unfettered use of
the property for her lifetime. Upon
her death the usufruct would pass
to Charles for a period of one year
after which it would revert to the
holder of the bare dominium.
Jack had therefore in effect
transferred the usufruct at a value
of R4 104 966 to Jill and his assets
were then valued at R3 895 034
which included the bare dominium
of the holiday home at a value of
R895 034.
Jack died leaving R3.5 million to Had Jack not bothered with an
the family trust, which included the estate plan and had he bequeathed
bare dominium, and the balance his entire estate to Jill who in turn
of R395 034 to his wife. On Jack’s bequeathed her entire estate to
death no estate duty was payable Charles, estate duty amounting to
as the Section 4A abatement of R1.3 million would have been
R3.5 million and the Section 4(q) payable thereby reducing Charles’
allowance reduced the dutiable inheritance by a like amount.
amount of the estate to R nil.
For the purpose of simplicity, the
Jill died a year later leaving an above example did not recognize
estate comprising her investments changes in asset values.
of R2 million, the amount inherited However I must issue a word of
from Jack of R395 034 and the warning if you choose to introduce
usufruct ceasing valued according usufructs into your estate plan,
to the prescribed tables at understand the full implications of
R53 574. Note that the value of so doing.
the usufruct had reduced from
R4 104 966 to R53 574 as Charles
has use of the holiday home for one
year only before the usufruct reverts
to the family trust being the bare
dominium holder.
Jill’s estate was not liable for estate
duty as the Section 4A abatement of
R3.5 million exceeded R2 448 608
being the value of her estate.

Q: I have heard that SARS has a new VAT
registration process. How does this work?
A: The new VAT application form has been reduced from
7 pages to a 4 page document. The only documents
now required to be submitted with the application form
for a company or CC are a copy of the ID documents of
2 of the members, directors or shareholders, a copy of
the ID document of the representative vendor and proof
of banking details.
The new process allows for a VAT number to be
provided over the counter at SARS branches.
Q: What are the new medical aid deduction limits?
A: For individual taxpayers, the monthly monetary caps
for tax-free medical scheme contributions have been
increased with effect from 1 March 2008 from R530 to
R570 for each of the first 2 beneficiaries and from R320
to R345 for each additional beneficiary.

(overheard)
Of the approximately 27 000 CAs(SA)
on SAICA’s membership books, more
than 6 000 are based overseas!