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HMRC internal manual

Business Income Manual

Meaning of trade: general: overview

This page provides a brief overview of the detailed guidance in this chapter.

  1. There is generally no dispute that activities amount to a trade but sometimes the conclusion is less self-evident.
  2. The statute provides little guidance on what amounts to trading.
  3. You will need to go to case law for guidance: there are a large number of cases dealing with this issue.
  4. The overall conclusion from case law is that:
* trade cannot be precisely defined, but
* certain characteristics can identified which are normally those of trade, and
* other characteristics can be found which preclude a profit from being that of a trade.

Case law is dealt with in BIM20085 onwards.

  1. Transactions undertaken solely for fiscal purposes are not trading, even if the outward characteristics of trading are present, because they lack the necessary commercial purpose (see BIM20105 - BIM20110).
  2. The question whether a trade exists is essentially one of fact to be decided by the appeal Tribunal, in the absence of agreement. The Tribunal decision is unlikely to be upset by the Upper Tribunal or the courts unless there was no evidence to support it (see BIM20070).
  3. Before you can take an informed view as to whether particular activities amount to trading, you must obtain and carefully consider all the facts.