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CHAPTER 2-4-1
CHANGE IN USE PRACTICE EXAMPLE SOLUTIONS
SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-1

Computer
The change in use 30% to 0%.
This is a total change in use
Output vat of R6,900 X 15/115 = R900 will be accounted for.
Input vat of the lower of cost (R11,500) or market value (R6,900) X 15/115 X 70% can be claimed. This is
R6,900 X 15/115 X 70% = R630 input vat.
Printer
This is a change in use from 30% to 100%.
This is a partial change in use.
There is no adjustment for February as partial changes in use are only in the year-end vat return.
No vat adjustment will be made at year-end as this asset cost less than R40,000.
Office furniture
This is a change in use from 0% to 30%. This is a total change in use.
Input vat based on the lower of cost (R22,300) and market value (R30,000) X 15/115 X 30% will be
claimed. This is R23,000 X 15/115 X 30% = R900 may be claimed.

SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-2

The bakkie is being used for business purposes in both applications. Thus there is no change in use
adjustment.

SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-3

The lounge suite is still being used by the company, but because it is now used for an exempt supply,
there is a total change in use and output vat of R11,500 X 15/115 X 100% = R1,500 will be levied.

There is no input vat claimable as 100% of the input vat was claimed when the furniture was acquired.

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SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-4

Any assets originally used in the provision of residential accommodation only will need an adjustment if
they were now used in the factory or for both the factory and residential accommodation.
 Residential accommodation asset to factory asset is a total change of use from 0% to 100%
 Residential accommodation asset to both factory asset and residential accommodation asset is a
total change of use from 0% to 88%.

Any assets used in the factory only will need an adjustment if they were now used in residential
accommodation only or for both the factory and residential accommodation.
 Factory asset to residential accommodation asset is a total change in use from 100% to 0%.
 Factory assets now used for both residential and factory is a partial change in use from 100% to
88%.

Any assets that remain in the factory only need no adjustment. They were used 100% for taxable
supplies and remain used 100% for taxable supplies.

Similarly any assets that remain in the residential accommodation business need no adjustment. They
were used 0% for taxable supplies and remain used 0% for taxable supplies.

SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-5

Looking at the requirements for a partial change in use

There needs to be a partial change in use.

The computer cost R40,000 or more including vat

The change in use is 10% or more

As the three requirements have been met, a vat adjustment is made using the market value at year end,
not the market value when the change took place.

The vat adjustment is lower of cost or market value (lower of R115,000 or R80,500 thus R80,500) x
15/115 x percentage change in use (100% - 70% = 30%) = 80,500 x 15/115 x 30% = R3,150.

The vat adjustment will be accounted for in the November vat return, the 2 month vat period that the
company’s financial year end of October falls.

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SUGGESTED SOLUTION TO PRACTICE EXAMPLE 6-6

TYPE OF
CHANGE TYPE OF VAT MONTH OF
IN USE VAT AMOUNT VAT RETURN DISCUSSION
1. Total Output R52,174 March 22% to 0% is a total change in use as the company
change in
use – vat went from a vatable enterprise to a non vatable
to non enterprise. Vat is R400,000 X 15/115 X 100% which is
vat
processed immediately when the total change in use
takes place using market value (including vat) when
the change in use takes place. Vat is at 100% for this
change in use
Input R40,696 March Remaining input may be claimed R400,000 X 15/115 X
78%
2a. Total Input R36,000 May 0% to 60% is a total change in use. Input vat claimed
change
as no input vat was claimed on acquisition of goods
that are now used for taxable supplies.460,000 X
15/115 X 60% claimed as input
2b. No None 0 Not The buses are still only used for the transport of fare
change in
use applicable paying passengers by road and as such it is an exempt
supply. There is no apportionment for vat as the
buses are not used in both parts of the business.
3. No None 0 Not 80% to 74% is a partial change. As the change is less
change in
use applicable than 10%, no vat adjustment is processed year
4. No None 0 Not Partial change of use vat adjustments are only done
change in
use applicable for assets that cost R40,000 or more.
5a Partial Output 12,209 November Partial change from 80% down to 54%, a 26% change.
change in
use This greater than 10% and the assets cost more than
R40,000. The adjustment is on the lower of cost or
market value for a partial change in use. Thus use
market value. Adjustment of R360,000 X 15/115 X
26% in the year end vat return.
5b Partial Output 3,900 November Partial change from 80% down to 54%, a 26% change.
change in
use This greater than 10% and the assets cost more than
R40,000. The adjustment is on the lower of cost or
market value for a partial change in use. Thus use
market value. Adjustment of R115,000 X 15/115 X
26% in the year end vat return.
6a. No None 0 Not Commercial properties are used 100% for vatable
change in
use applicable purposes by this organisation. There is no change in
use.
6b. No None 0 Not Residential properties are used 100% for exempt
change in
use applicable supplies of residential accommodation. There is no
change in use.
6c. Partial Output 822 March Head office assets are used for commercial and
change
residential property purposes as head office works
towards both divisions. There is a change from 100%

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TYPE OF
CHANGE TYPE OF VAT MONTH OF
IN USE VAT AMOUNT VAT RETURN DISCUSSION
to 82% = 18%. This is a partial change in use. This
exceeds 10% so the change will be accounted for in
this year, but only on assets that cost R40,000 or
more including vat. Use the lower of cost or market
value to process a partial change in use, thus use
market value. 18% X 35,000 X 15/115 is the change in
use adjustment on assets costing R40,000 or more.
7. Partial Input 16,500 May Even though the movement for this year was 5%, it is
change
11% movement from the actual vat input claimed.
Thus a partial change in use is made 11% X 1,150,000
X 15/115
8. Partial Input 14,478 June 70% use to 100% use is a partial change in use. This is
change
vatable supply where the change in use leads to a
bigger vatable supply. Lower of cost or market value
at year end is used to calculate the partial change in
use. Movement in use is 10% or more and the asset
costs R40,000 or more. Use the market value which is
lower than the cost. The vat adjustment is 370,000 X
15/115 X 30%
9. Partial Input 7,982 October This is a partial change in use. The de minimus rule
change
(round 95% or more to 100%) does not apply for a
change in use and the 97% is not rounded up to
100%. There is a movement of 10% or more (from
80% to 97%) and a cost R40,000 or more thus adjust
vat by 17% X 360,000 (lower cost or market value) X
15/115 = R7,982
10. No None 0 Not Original purpose where a factory was built was 100%
change in
use applicable vatable. New purpose of building a commercial
building is also 100% vatable. There is no change in
use.
11. Partial Output 37,565 July When acquired, the de minimus rule applied. The
change in
use 96% was rounded up to 100%, and 100% input vat
was claimed. Partial change in use from 100% - 88%.
As change in use reduces use, an output is levied
using open market value in the calculation. 2,400,000
X 15/115 X 12% = R37,565 vat adjusted
12. Partial Input 7,565 March 290,000 X 15/115 X 20% adjustment – Use the lower
change in
use of market value and adjusted cost upon which vat
was allowed for manufactured assets.
13. Partial Input 5,348 March 205,000 X 15/115 X 20% adjustment – Use the lower
change in
use of market value and adjusted cost upon which vat
was allowed for manufactured assets.

14. Total Output 26,739 February 80% - 0% change, thus this is a total change in use
change in
use from vatable supplies to non vatable supplies. Output
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TYPE OF
CHANGE TYPE OF VAT MONTH OF
IN USE VAT AMOUNT VAT RETURN DISCUSSION
vat on reduced use. Thus use open market value for
change in use. 100% X 205,000 X 15/115 = 26,739
14. Total Input 5,348 February Input vat can now be claimed on the 20% not claimed
change in
use for before because vat output levied at 100%. 20% X
205,000 X 15/115 = R5,348
15a. Partial Input 3,375 July 15% change in use. Only 172,5/230 = 75% of the asset
change in
use has been paid for at year end. Therefore only 75% of
the notional vat has been claimed on the asset at year
end. Thus only 75% of the asset is subject to the
change in use. Thus 75% X 15% X 230,000 X 15/115 =
3,375
15b. Partial Input 7,500 August R57,500 X 15/115 = R7,500 notional input vat for
change in
use payment for 2nd hand goods.
16a. Total Output 2,347,826 March Total change in use thus asset deemed to be sold at
change in
use open market value. 18,000,000 X 15/115 X 100% =
2,347,826. Even though only 70% input claimed upon
acquisition, output vat is levied at 100%.
16b. Total Input 489,130 March 12,500,000 X 15/115 X 30% claimed. Old rules do not
change in
use apply.
17. No None 0 Not The assets were used for business purposes in both
change in
use applicable divisions. No vat adjustment necessary.
18. Total Output 15,000 February Total change in use from business purposes to non
change in
use business use. R115,000 X 15/115
19. Total Output 180,000 August Total change in use from resident (exempt supply) to
change in
use 60% office. 60% X R2,300,000 X 15/115

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