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HMRC internal manual

Business Income Manual

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Meaning of trade: general: judicial guidance

The Tax Acts do not provide any direct statutory guidance on the meaning of ‘trade’ apart from the limited definition in S989 Income Tax Act 2007 (ITA 2007) and S1119 Corporation Tax Act 2010 which ‘includes any venture in the nature of trade’ (see BIM20060 onwards). Subject to this extra help, the word ‘trade’ therefore takes its ordinary meaning.

In Smith Barry v Cordy [1946] 28TC250 Scott LJ, who was considering what is now S 989 ITA 2007, said at page 258:

‘As the definition includes the very word trade without qualification, that word must be used in its ordinary dictionary sense and the other words must necessarily be intended to enlarge the statutory scope to be given to the word trade’.

This is authority for the view that ‘trade’, for tax purposes, includes situations which fall short of being full blown, unquestionable, trades (see BIM20065).