Stephen Manning, a South African resident, founded Hilton Manufacturers (Pty) Limited, which controls 75% of the shares.

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Stephen Manning, a South African resident, founded Hilton
Manufacturers (Pty) Limited, which controls 75% of the shares. Five
of Stephen's business friends each own 5% of Hilton Manufacturing
(Pty) Limited, totaling 100%. One of the five minor stockholders
works for Hilton Manufacturing (Pty) Limited. Hilton Manufacturing
(Pty) Limited is not a microbusiness.
The following was taken from the financial accounts for the year
ending February 28, 2021:
Note that all prices exclude VAT. Please disregard VAT.
Net gain (before adjusting for the following transactions)
R280.000
Publicity (note 1) 112 000 $ in interest (note 2) 149 800 149 800
149 800 (note 3) 2630000
Debts (note 4) 6 300 Rentals (note 5) Premium of $20,000 (note 5)
72 000 Leasehold improvements (note 5) 585 750 Annuity (note 6) 6
600 $ marketing abroad (note 7) 25 940 Directors' fees and salaries
(note 8) 496 000 Dividend declared on December 31, 2020 30 November
2020: $20,000 local investment dividend Stephen Manning's 12000
drawings (note 9) 7770
Notes:
1. Advertising expenditure includes R20 000 paid to a television
network for a series of adverts to run during the assessment year
of 2022. The R112 000 includes the R42 000 cost of the television
commercial and the R12 000 cost of each of the three digital
billboards.
2. Interest (local) is made up of: R18 000 on a loan from Stephen
Manning to finance machinery purchase; R9 000 on a loan from
Stephen Manning to finance raw material and trading stock purchase;
R1 600 on a loan raised to finance dividend payment; R1 200 on a
loan raised to finance Machine A purchase; R120 000 on a loan to
finance the erection of the ad.
3. On 31 May 2020, Hilton Manufacturing (Pty) Limited finished the
R2 430 000 extra plant. The Pinetown property was bought for R750
000 in the 2020 assessment year.
4. Bad debts included:
• A boss who departed without returning a loan 300 • A trade debtor
who is said to be in financial problems 800
6300
Doubtful debts are deducted at 25%.
5. On May 1, 2020, Hilton Manufacturing (Pty) Limited signed a
12-year leasing arrangement for neighboring industrial space. The
monthly rental was R2000, but a R72000 lease premium was due upon
signing. Hilton Manufacturing (Pty) Limited had to make R532 500
worth of renovations. The R585 750 project was finished on 30 June
2020. Although the facility opened on May 1, 2020, the 25% increase
in industrial capacity was implemented on June 30, 2020.
6. Hilton Manufacturing (Pty) Limited granted a R7 200 annuity
(R600 monthly) to the widow of an employee died in an accident. The
widow's financial situation necessitated an exception to the
policy.
7. Hilton Manufacturing (Pty) Limited registered as an exporter in
2021. The following costs were incurred in the export trade:
• Namibian Advertising (trade journal) 340
• Attending a trade show in Botswana 800
• Capital expenses for a Turkish agency 23 800 25 940
8. Stephen Manning received R288 000 in salary and R72 000 in fees
as a director.
9. Stephen Manning financed Hilton Manufacturing (Pty) Limited.
Hilton Manufacturing (Pty) Limited reimburses Stephen Manning for
the following expenses:
• Medical costs 3 800; • Retirement annuity contributions 2
700
• Personal life insurance premiums 840 • Domestic costs 360 7
700
10. The fixed asset registry revealed:
• Plant and equipment had a tax value of R150 000 on 1 March 2020,
with an initial cost of R250 000. A machine that cost R15 000 with
a tax value of R10 000 on March 1, 2020 was included in this tax
value of R150 000. The machine was acquired on February 1, 2019 and
insured for R14 000.
• On 31 March 2020, Machine A cost R18 000 new. It was operational
on May 1, 2020, following an R2 500 installation fee.
• A new delivery truck for R176 000 was bought on 1 June 2020. It
replaced an existing delivery vehicle with a R8 000 tax value
(bought on March 1, 2017 for R32 000) sold on May 31, 2020 for R5
000. The Commissioner allowed a four-year write-off.
YOU MUST
1. Calculate Hilton Manufacturing (Pty) Limited's regular tax
obligation for 2021.
Explain why certain sums are included or omitted.
2. Calculate Stephen Manning's tax liability for the year 2021.
Assume he is 50 years old and has no other receipts.