An Interdisciplinary Study: Deferred Tax Implications of Lay-By Agreements for Financial Planning and Decision Making

Ahmed Mohammadali Haji (), Muneer Hassan, Michelle van Heerden and Milan van Wyk
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Ahmed Mohammadali Haji: Department of Accountancy, College of Business and Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa
Muneer Hassan: Department of Accountancy, College of Business and Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa
Michelle van Heerden: Department of Accountancy, College of Business and Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa
Milan van Wyk: Department of Accountancy, College of Business and Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa

JRFM, 2025, vol. 18, issue 5, 1-17

Abstract: Due to tough economic conditions, more retailers are relying on lay-by agreements to maintain revenue. Lay-by agreements are thus part of their business models and are included in their forecasting and budgeting strategies. As part of financial planning, decisions need to be made based on financial information to achieve organisational goals. A recent South African income tax amendment regarding lay-by agreements resulted in three possible income tax interpretations. This study analysed and evaluated the implications of these amendments for South African deferred tax. The study utilised a doctrinal approach in an interpretive paradigm. The results show that the amendment in the South African Income Tax Act relating to lay-by agreements has an impact on deferred tax calculations, depending on the tax interpretation used. The resulting ambiguity and diversion in the practice of the deferred tax treatment may potentially lead to less useful financial information, contrary to the objectives of the International Accounting Standards Board for effective decision making. This study recommends that the National Treasury should clarify this ambiguity, through either legislative amendments or an interpretation note. This will create the necessary certainty for organisations to plan their finances.

Keywords: lay-by agreements; deferred tax; financial reporting; financial planning (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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