Tax cases Flashcards
Fry v Burma Corporation Ltd
A case concerning a mining business, that provided an early definition of trade. Of using the earths resources, manufacturing, buying and selling or offering services.
Smith Barry v Cordy
Provided a definition of trade, the ordinary dictionary definition and other words that enlarge the scope to be given to the word “trade” in legislation.
Ransom v Higgs
A definition of trade, denoting operations of a commercial character by which the trader provides to customers for reward some kind of goods or services.
Additional points from other cases defining trade (6)
- A speculative adventure that yields an unexpected profit may be within the scope of a trade. The profit from activities like this must be income rather than capital.
- You can identify certain characteristics trade normally has.
- There are also things which prevent a profit from being regarded as a profit from a trade.
- Sometimes whether activities constitute trading depends on a matter of degree, or frequency, of organisation, even of intention.
- There are elements of characteristics which prevent a trade from being found even though a profit has been made.
- Each case depends on its own facts.
Marson v Morton
Profit on a single land transaction was found to be a capital rather than trading receipt. The judge came up with nine badges of trade.
Edwards v Bairstow and Harrison
Bought a spinning plant to sell for profit, they split it down into five lots over many months. A tribunal found that as it was a one-off but the judges in the House of Lords over-ruled as it was an adventure in the nature of trade.
The badges of trade from Marson v Morton
- Existence of a profit-seeking motive
- The number of transactions
- The nature of the asset
- The existence of similar trading interests
- modification of the asset
- the way in which the sale was carried out
- the source of finance
- the interval of time between purchase and sale
- The method of acquisition
Grove v YMCA
An on site restaurant was found to be trading even though other parts of the YMCA (classes, etc.) were not run on a commercial basis.
CIR v Livingstone and Others
Three associates bought a cargo ship and converted it to a drifter and sold for profit. Although a one-off Judge found it had ‘characteristics of ordinary trading.’
CIR v Fraser
Woodcutter profited from selling whisky, although many badges were neutral and his day job was not connected. He was trading as he went about selling the whisky the same as any dealer. Also buying more whisky than can be drank and must be sold to realise a profit is significant. This case also gave us three reasons for buying something (personal enjoyment, investment or profit).
Pickford v Quirke
Made a profit selling a series of four cotton mills, found to be a trade. One transaction does not make a trader, but if repeated and systematic then he becomes a trader.
Leach v Pogson
Sold a driving school as capital gain and then sold 30 more. Judge ruled it was trading and that later transactions reflected on the first.
Rutledge v CIR
Purchased 1M toilet rolls in Berlin, took them to London and sold in one transaction. Court ruled it was an’ adventure in the nature of trade’ as only reason to buy so many is to sell them.
Harvey v Caulcott
Builder sold houses many years after building them. Court commented case was coloured by his similar trade, but found in his favour due to length of time owned. The onus is on the builder to convince us that it wasn’t trading stock.
Cape Brandy Syndicate v CIR
Three wine merchants bought S Africa brandy, mixed it with French brandy and put it in smaller casks and sold in the UK. They argued it was speculative investment but as they modified the assets character in both mixing it and putting it in smaller casks was a factor.
Martin v Lowry
Bought surplus linen after WWI, couldn’t sell it to Belfast Linen so set up a staff of sales clerks, advertises and experts to sell it. He was trading and key factor was the sales team he had assembled.
Wisdom v Chamberlain
Bought silver bullion to protect against sterling devaluation. He took out a loan that could only be paid back selling the asset. Found to be trading as he owned them a short length of time, no pride of ownership and the way it was funded.
Taylor v Good
Purchased a country house but his wife refused to live there. So he got planning permission for 90 houses and made a profit. Was found not to be trading, he argued that his intentions were not trading but his actions were in line with any home owner enhancing the value of a capital asset.
Iswera v CIR
Borrowed money to buy 2.5 acres near school and split it into plots and sold them. She kept two for herself and was found to be trading as primary motive was to profit and get her own plot cheaper.
Lionel Simmons Properties v CIR
Formed several companies to develop property with the aim of flotation. Didn’t work so they sold properties and liquidated, properties were found to be investments and not trading stock. Gave us the concept that an asset can only have one status at any given time.
Kirkham v Williams
Land acquired for principal purpose of providing office and storage for plant hire business. A house was built and then plot sold, not trading as when purchased the purpose was too indefinite to prove trading.
Hudson Bay Company v Stevens
Gave up rights to land in Canada in exchange for cash and reclamation rights, reclaimed land was then sold. Not found to be trading as company had not bought the land, Judge likened it to someone who had inherited land.
Salt v Chamberlain
Case law for individuals involving shares, buying and selling shares for individuals is not normally a trading activity.
Cooper v C and J Clark
Case law for companies involving shares, buying and selling shares for individuals is not normally a trading activity.
Lewis Emanuel & Sons Ltd v White
Fruit and Veg importer started buying and selling securities. Claimed relief on losses on the securities, Judge concluded that it was a trade if it was a permitted activity in memorandum.
Municipal Mutual Insurance Ltd v Hills
That a mutual fund where participators contribute to a common fund and have entitlement to the surplus can take any form, and that any such surplus is tax free.
Styles v New York Life Insurance Co
Members paid into insurance and any surplus after claims is paid back to the same members, surplus not a trading profit as individuals just getting a refund of their own money paid in.
Graham v Green
Lived off proceeds of betting on horses, court ruled he was not trading and also ruled that his winnings were not profits.
Lindsay, Woodward & Hiscox v CIR
Smuggled whisky to USA during prohibition. This was considered a trade.
Mann v Nash
Supplied fruit machines which were illegal, Judge found that just because trade was ‘tainted with illegality’ did not mean profits weren’t taxable.
Harrison (Watford) Ltd v Griffiths
Judge commented that burglary was not a trade.
Partridge v Mallandine
Systematic receiving of stolen goods (“a fence”) was taxable.
Wing v O’Connell
Jockey given cash gift for winning a race, was found to be part of his business income as there was no element of it being made for personal reasons.
Gray v Lord Penrhyn
Quarry received compensation for misappropriated wages from auditors, was found to be trading income as it came in the course of business.
