CIR v Niko : a question of economic reality

Show simple item record Stack, E.M. Stiglingh, M. (Madeleine) Koekemoer, Anton 2016-02-25T09:12:51Z 2016-02-25T09:12:51Z 2015
dc.description.abstract This article analyses the facts and judgment in CIR v Niko, involving the transfer of business assets from a sole trader to a company, the shares of which were substantially owned by the same sole trader. This case changed the inherently fl awed, but prevailing practice at that stage of regarding a lump-sum payment from a lock-stock-and-barrel sale of a business as a receipt of a capital nature, to a receipt that needed to be allocated to the various assets included in the sale, and therefore potentially the receipt would be partly of a capital and partly of a revenue nature. Although the conclusion relating to lock-stock-and-barrel sales in general was sound, the submission made in this article is that, in the particular circumstances of the case, the economic reality of the transaction was not considered – virtually no economic gain was realised by J. Niko, the seller and sole owner of the business to a company of which he was also the substantial shareholder. Two subsequent court decisions, which similarly ignored the economic reality of the transactions in the context of a group of companies, followed this judgment. In this article, the problematic nature of the decisions that ignored the economic reality of the transactions is demonstrated with reference to accepted canons of a good taxation system. The article also explains the partial legislative relief that has subsequently been granted for transfers of assets from a person to a company and for transfers within a group of companies, but concludes that there is a need for full recognition of a group of companies as an economic entity for tax purposes. en_ZA
dc.description.librarian am2015 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Stack, EM, Stiglingh, M & Koekemoer, A 2015, 'CIR v Niko : a question of economic reality', Southern African Business Review, vol. 19, pp. 139-160. en_ZA
dc.identifier.issn 1561-896X (print)
dc.identifier.issn 1998-8125 (online)
dc.language.iso en en_ZA
dc.publisher Unisa Press en_ZA
dc.rights © Copyright. Southern African Business Review, College of Economic and Management Sciences, University of South Africa en_ZA
dc.subject Integrated group tax system en_ZA
dc.subject Economic reality en_ZA
dc.subject Economic unit en_ZA
dc.subject Group of companies en_ZA
dc.subject Lock-stock-and-barrel sale en_ZA
dc.subject Principles of equity and neutrality en_ZA
dc.subject Sale of business en_ZA
dc.subject Transfer of business assets en_ZA
dc.title CIR v Niko : a question of economic reality en_ZA
dc.type Article en_ZA

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