HMRC internal manual

Business Income Manual

Financial traders - instruments and shares: three cases involving individuals

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An activity of buying and selling shares and other financial instruments undertaken by an individual will normally amount to investment or speculation falling short of trading unless there are factors which take the case ‘out of the norm’ (see BIM56850). Three cases where such activities have been considered are:

  • Salt v Chamberlain [1979] 53TC143,
  • Wannell v Rothwell [1996] 68TC719, and
  • Manzur v HMRC [2010] UKFTT 580(TC).

Salt v Chamberlain

The Commissioners in this case found that Mr Salt was not trading, and Oliver J held in the High Court that the facts entitled the Commissioners to come to this conclusion.

Mr Salt was a mathematics graduate who used his knowledge of computers to forecast the movements in share prices. In the period 11 December 1968 - 31 March 1973 he entered into approximately 200 transactions for the purchase and sale of securities, which included put and call options and settlements at the end of an account for balances only. He used his own funds as well as borrowings from the bank and against life assurance policies.

Wannell v Rothwell

Mr Wannell had previously worked for a commodity futures dealer as a trader prior to the commencement of his activity. His duties had included advising clients on long-term investments and short-term trading opportunities in commodity futures and options. He had obtained qualifications relevant to his duties and, in the course of his own activity, had access to market reports and analysis but not a full screen service. All the transactions were placed with a broker. There were 11 purchases and sales of commodities between May and October 1986 and 46 purchases and 49 sales of shares between October 1985 and August 1987. He dealt on his own account and there were no customers.

The Deputy Special Commissioner said:

‘The essential point in the present case is that of organisation. Was the Appellant, doing two or three deals a month from home through brokers, but doing them with the benefit of experience, training and contacts which he had, organised in a way that a trader could be said to be organised? The case is very close to the borderline, and if the only question I had to decide were whether the Appellant was trading, I might be inclined to give him the benefit of the doubt and find that he fell, by a hair’s breadth, on the trading side of the dividing line.’

This case considered not only the question of whether Mr Wannell was trading but whether he was trading commercially for the purposes of relief for losses (see BIM85705), and the Deputy Special Commissioner concluded that:

‘a case which is so close to the trading borderline because of its lack of commercial organisation is bound to be on the wrong side of the [loss relief] borderline.’

When this case came before the High Court, Robert Walker J found that the Deputy Special Commissioner must be taken to have found that Mr Wannell was trading, but also that he had had sufficient evidence before him to come to the conclusion that the activity was not carried on commercially, so the losses could not be set off against general income. There is more information on losses in this context at BIM85705.


Mr Manzur was a retired surgeon. He used his own savings to begin acquiring stocks and shares. He made between 240 and 300 trades in a year using an online stockbroker. Some of the shares were turned over very quickly but others were retained for six months or more.

The tribunal held that Mr Manzur’s buying and selling amounted to the management of a portfolio of investments rather than trading. They upheld the view in Salt v Chamberlain that the badges of trade were of limited value and said there was no definitive checklist which could be used to say whether someone was trading or not. The number and frequency of transactions, and the short-term nature of the holdings alone did not establish trading. Other factors taken into account were:

  • the time spent on the activity (about two hours a day);
  • the fact that Mr Manzur did not entirely rely on his own expertise but used the advice of brokers;
  • that the activities were not characteristic of established share dealers, for example Mr Manzur had no customers and was dependent on market movements alone to make a profit.


The cases discussed above show that no one factor can determine whether an activity has been taken ‘out of the norm’. Some factors may be more relevant in some cases than in others. You have to take a view after considering the relevant circumstances as a whole.