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HMRC internal manual

Business Income Manual

Meaning of trade: badges of trade: profit-seeking motive - fiscal purpose

The purpose behind a transaction or transactions may be to get a tax advantage through, for example, establishing a loss, which can lead to repayment of tax paid at source, or can be set against other income, which would otherwise be taxed. The intention to seek such a fiscal ‘profit’ does not support a finding that the transaction was a trading transaction, or that an asset was trading stock, or that the person was carrying on trade for tax purposes. The transaction must have a commercial purpose if it is to be a trading transaction.

For example, see Overseas Containers (Finance) Ltd v Stoker [1989] 61TC473 and the remarks of the Vice Chancellor at page 536C onwards. The question of fiscal purpose is also discussed at BIM20105 onwards.