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HMRC internal manual

Business Income Manual

Particular trades: commodity transactions

Trade profits or capital gains?

Transactions in commodities may take the following forms:

  1. actual purchases and sales of a commodity;
  2. `futures’ contracts where there is frequently no intention of supplying or taking delivery of the commodity on maturity of the contract;
  3. a combination of (a) and (b) above.

Where a person enters directly into transactions involving the purchase and sale of a commodity, the profit is normally chargeable as profits from `a venture in the nature of trade’ (see CIR v Fraser [1942] 24TC498, and Wisdom v Chamberlain [1968] 45TC92).

Futures contracts entered into by a company are dealt with under the derivative contracts regime. See CFM50000 onwards.

Profits from transactions in commodity futures on a `recognised futures exchange’ made by non-corporate taxpayers are, unless they are trade profits, treated as chargeable gains (see CG56004).