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HMRC internal manual

Business Income Manual

Meaning of trade: general: principles from case law

The body of case law on the meaning of trade has produced two different approaches to the issue of whether or not activities amount to a trade.

In recent years, the courts have tended to take a holistic view of trading as a bilateral relationship whereby the trader supplies goods or services to a customer for reward. If the activity looks like something that is commonly accepted to be trading then it too is trading. See BIM20102 for further guidance.

Earlier cases focused on examining the facts to look for the presence or absence of common features or characteristics of trade. These are the so-called ‘badges of trade’, of which nine have been mentioned from time to time. See BIM20200 onwards for further guidance.

A further principle established from case law is that transactions undertaken solely for fiscal purposes (to get a tax advantage) and not for commercial purposes are not trading transactions, even if the outward characteristics of trading are present. See BIM20105 onwards.