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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Meaning of trade: badges of trade: intention - stated intention

You will rarely find that a person who disputes that a transaction amounts to trading will admit that their intention was to trade. That intention usually has to be inferred from the surrounding circumstances. A function of the badges of trade (see BIM20200 onwards) is to help identify that circumstantial evidence.

You should distinguish an intention to trade from an intention to seek a profit from a transaction. The latter is one of the badges of trade, but is not conclusive, in the absence of other factors, because the intended profit could be a capital profit on an investment (see BIM20210).

If there is no admission of a trading intention then you must look at the transaction objectively and decide its character from the surrounding circumstances. If you conclude, on balance, that there is trading then you should argue that the stated intention can be disregarded because the trading intention is implicit from the objective facts and the transaction is unequivocally trading.

Loss making transactions

If the transaction is loss making, so that relief for losses is sought, there will usually be an assertion of a trading intention. The assertion should be tested objectively and the character of the transactions decided from the surrounding circumstances. If you conclude, on balance, that the activities do not amount to trading then you should argue that the stated intention can be disregarded, because the absence of a trading intention is implicit from the objective facts and the transaction is unequivocally not trading.