This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Meaning of trade: scope of trade: relevant case law


The cases of Collins v The Firth-Brearley Stainless Steel Syndicate Ltd [1925] 9TC520 (see BIM21015) and The Rees Roturbo Development Syndicate Ltd v Ducker [1928] 13TC366 (see BIM21020) provide confirmation that the scope of a trade is essentially a question of fact. Further, the contrasting decisions illustrate how, in marginal cases, different tribunals can come to different conclusions on the basis of very similar facts.

As Rowlatt J noted, in the Rees Roturbo case at pages 381 and 382:

‘… I feel very uncomfortable about the Firth-Brearley case being decided one way and this case being decided the other way - the facts are so very nearly the same. But when you have got liability to Income Tax dependent upon findings of fact and there are different tribunals who find those facts, the result of such things is unavoidable.’

The Upper Tribunal and the courts will only overturn the First-tier Tribunal’s conclusions on questions of fact, if there is evidence that the Tribunal has misdirected itself, or the conclusion reached is not sustainable on the facts found (Edwards v Bairstow and Harrison [1955] 36TC207). It is for this reason that, in any disputed case, all of the relevant facts should be fully established before the Tribunal.

The case of The Gloucester Railway Carriage and Wagon Co Ltd v CIR [1925] 12TC720 (see BIM21025) illustrates that the hiring out of trading stock, prior to sale, does not necessarily result in the subsequent sale being on capital account. A point that is reinforced in the case of J Bolson & Son Ltd v Farrelly [1953] 34TC161 (see BIM21030). The latter case also highlights the need to look beyond the description of the activity to consider what it is that the person actually does.



The contrasting decisions in the cases of The Alianza Company Ltd v Bell [1905] 5TC60 and 172 (see BIM21035) and Golden Horse Shoe (New) Ltd v Thurgood [1933] 18TC280 (see BIM21040) also illustrate the need to look beyond the superficial description of a trade and consider the detail of the actual activities undertaken.

They also demonstrate that the question may turn on relatively fine distinctions. In the Alianza case the minerals had not been ‘won from the soil’, whereas in the Golden Horseshoe case the raw material had been ‘already won and gotten’ and had not yet become part of the land again.