The receipt or accrual of a capital nature or income: a critique

Abstract

In Zimbabwe, the concept of income as distinguished from capital is a field that still has scope for scholarly work and research. Unlike South Africa and the United Kingdom, Zimbabwe has the Income Tax Act and the Capital Gain Tax Act both of which relate to gains in income and capital respectively. The Income Tax Act defines gross income and says that which is of a capital nature is excluded from assessable income tax.The Act does not define that which is of a capital nature. The body of knowledge that exists on this subject matter derives largely from case law. In the Republic of South Africa and the United Kingdom, both countries tax capital gains under the provisions of the income tax. There is no separate legislation outside the Income tax legislation dealing with capital gains in both countries.

There is a general consensus that the income-capital distinction in relation to receipts or accruals in the taxpayers’ hands remains unsettled. There is no single fashioned indicia that applies universally in all instances to demarcate the two concepts. Where there is debate, recourse has not been to look at legislation but at case law which has developed various tests in an attempt to speak definitively on the distinction. This research explores the capital-income distinction in relation to receipts and accruals in the tax payers’ hands in the Zimbabwean context and seeks to add to the existing body of knowledge on the subject matter.