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HMRC internal manual

Business Income Manual

Miscellaneous income: scope of the provisions: series of sales of assets

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

When looking at whether or not the profits from a series of sales of assets are taxable as income you should first consider whether it amounts to a trade before you consider the miscellaneous income provisions.

Casual profits made from the isolated buying and selling of assets may amount to a trade, see BIM20230 for further guidance. It is recognised that the case for trading may be strengthened where there are repeated transactions, see BIM20240.

In the case of Cooper v Stubbs [1925] 10TC29 a large number of transactions (50 transactions a year over an eight year period) were found assessable under the miscellaneous income sweep-up provisions, but later cases suggest that today a case like Cooper v Stubbs might be viewed as giving rise to trading rather than miscellaneous income, depending on whether the activity was viewed as speculative rather than organised as a trade, which is a question of fact.

How far the courts could interfere with findings of fact made by a lower court had not then been fully settled. This included cases where the Commissioners’ decision did not seem reasonable based on the findings of fact. In the Court of Appeal, Pollock MR disagreed with the majority view and held that the Special Commissioners had misdirected themselves and that the profits were taxable as trading income. Pollock MR did not rule out that the profits could be taxed as miscellaneous income but his view was that they were taxable as trading income.

Later cases suggest that courts today would follow the approach of Pollock MR and decide that a Tribunal had misdirected itself. The assessment would be as trading income.

In the Irish case of HH v MJ Forbes [1974] 2ITR614, Kenny J considered Cooper v Stubbs and said that:

‘I think that the decision by these two judges that they could not interfere with the finding of fact by the commissioners was incorrect and that since Viscount Radcliff’s great speech in Edwards v Bairstow & Harrison [1956] AC14, 36TC207, the position is now different.’