Scope of Trade

Posted on 2nd August 2022 by Streets Business


Image to represent Scope of Trade

There is no statutory definition of ‘trade’. The only statutory reference to the term is that ‘trade’ includes a ‘venture in the nature of trade’. This absence of a formal definition decides if an activity is a trade more difficult. However, over time the courts have set some established guidance. 

It is clear from the significant amount of case law on this subject that a decision on whether there is a trade is a grey area. However, even having established that a trade, or a venture in the nature of trade, exists, the next question to consider is the scope of that trade.

HMRC’s internal guidance on this matter states as follows:

In many cases the nature and extent of a particular trade is never explicitly considered. This is particularly the case where there is no dispute about the nature of the trade, whose scope is implicitly understood and accepted.

However, the scope of a particular trade is fundamental when questions arise concerning:

  • whether particular receipts are income of the trade,
  • whether expenditure is incurred wholly and exclusively for the purposes of the trade, or
  • whether expenditure is capital or revenue for tax purposes.

One trader’s sale, or purchase, of a fixed capital asset may be another trader’s sale, or purchase, of trading stock.


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The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


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