A sole proprietor sold a helicopter. The taxpayer is registered for VAT (other business). The helicopter is only for personal use. No input VAT was claimed. Please advise on the following: 1. Is it correct that no output VAT is charged on the sale of helicopter? 2. Could SARS argue that output VAT remains payable? 3. Even though this is sale of a personal asset, will capital gains tax still be applicable as this is an aircraft with an empty mass exceeding 450kg? 4. Wear and tear was claimed on the helicopter. The taxpayer will recoup the amounts claimed now when calculating CGT and submitting the tax? 5. The taxpayer also sold his primary residence (estimated capital loss to be more than R2m). Will the capital loss be allowed to decrease capital gain on helicopter? Is there any reason it will not be allowable/ring-fenced?


Important:

This answer is based on tax law year ending 28 February 2021.

Answer:

You stated that the individual acquired the helicopter and is the registered vendor. A person registers as a vendor, and not only in respect of certain activities. From the facts it is clear that the goods (the helicopter) was used (and held at the time of supply) by the vendor (the individual), but NOT wholly for the purpose of consumption, use or supply in the course of making taxable supplies (or partly so). The issue is not whether a deduction of input tax was made, but for what purpose the goods, the helicopter, was used by the vendor. Because the goods were not used or held for ‘taxable purposes’, the supply will not be a taxable supply – essentially not made in the course of carrying on an enterprise. No output tax will then be levied. A deduction of input tax, there was none (based on our assumption), can also not be made – principally as the supply is not a taxable supply (or a non-supply) and there was no change in the intention. We agree with your view on the personal use asset – see Paragraph 53(3)(c) of the Eighth Schedule, “personal use assets do not include … an aircraft, the empty mass of which exceeds 450 kilograms”. The wear and tear, or section 12C (more likely) allowances deducted must indeed be recouped, but we are not sure how this was claimed as the individual used the helicopter for private purposes (and not for trade purposes). The capital loss, on the disposal of a primary residence, to the extend it exceeds the R2 million exclusion, can be used in arriving at the net capital gain for the individual.

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