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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Measuring the profits (particular trades): land: trading transactions: equivocal and unequivocal transactions

There may be cases where, on examination of all the facts, it is difficult to decide whether the transaction is part of a trade. A distinction between these ‘equivocal’ transactions and the ‘unequivocal’ variety is drawn in the past cases. Examples are Iswera v CIR [1965]], 1WLR668, a Ceylonese Privy Council Case, copies of which are available from CTISA, and Kirkham v Williams [1991] 64TC253.

There are no hard and fast rules as to what makes a transaction equivocal. The matter was considered in Kirkham v Williams. In that case Nourse LJ thought an equivocal or ambiguous case was one in which the facts, when viewed on their own, did not tell you whether the land was acquired as trading stock or as a capital asset.

In ‘unequivocal’ or unambiguous cases the purchaser’s actual intention will not be conclusive (see Iswera v CIR). Where the transaction is equivocal the purchaser’s motive(s) for entering into a transaction may determine the character of the whole transaction.

A purchaser’s stated intention of a single capital transaction will constitute evidence that the Tribunal must accept unless sufficient evidence of a trading intention can be adduced by reference to the badges of trade.

This is the principle to be drawn from Iswera which was cited with approval in Kirkham.

As a general rule we should, when the facts allow, argue that the transaction was unequivocal. This means, identifying as many badges of trading as possible.