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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
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Meaning of trade: badges of trade: nature of the asset

The nature of the asset can be of great, even decisive, importance. Some assets are generally realised by way of trade (for example chemicals) and for transactions in such assets the existence of a trade is rarely in doubt. The area of difficulty concerns assets that are generally bought:

  • as an investment that usually, but not necessarily, yields income, for example shares (see BIM20250), or
  • for personal use or enjoyment, for example, paintings and classic cars (see BIM20255), or
  • as a fixed asset of an admitted trade, for example, plant and machinery.

Their very nature provides an initial presumption that these types of assets are acquired other than as a subject of trade. See the comments of the Lord President in CIR v Fraser [1942] 24TC498 at page 502. That presumption can be overturned, but there is, in practice, a greater onus on those who assert that there is a trade, than is the case with assets that are commonly dealt with by way of trade.