The tax legislation rarely defines ‘trade’ beyond that which ‘includes any venture in the nature of trade’.^[1] For a restaurant, retail store or bank, the trade is usually quite clear. Where it is not so clear, one must look to case authorities for guidance.

When a Chelsea property was sold for £27m in 2015, HMRC sought to argue that the purchase and resale of the property was an ‘adventure in the nature of a trade’, or alternatively the principal private residence exemption from capital gains tax did not apply. 

The taxpayers persuaded the First-Tier Tribunal (“FTT”) that they were not engaged in such a venture after spending significant time, energy and resource creating a home that was highly personal to them and their lifestyle.

One does not need to be selling a property, nor have facts which directly correlate: the “badges of trade” authorities should be taken as guidance rather than a strict checklist. In all cases, it remains important to take a step back and look at the bigger picture; is this evidence of a trade, or is it something else?

A copy of the FTT decision can be found here. 

^[1] S.989 Income Tax Act 2007.