BIM20065 - Trade: general: adventure or concern

The definitions in ICTA88/S832 (1) and ITA/S69 are quite broad and even circular in some respects. However, it does make clear that activities that, in ordinary language, may not be a full-blown trade can nevertheless be taxable as trading income. The definition brings in transactions that might in some respects be less than full trading operations but are sufficiently close to trade to be included in its meaning for tax purposes.

It has been suggested that only 'concern' is qualified by the words 'in the nature of trade' so that 'adventure' stands alone. However the courts have often used the phrase 'adventure in the nature of trade' to describe the test which brings activities within trading income. For example, in Edwards v Bairstow and Harrison [1955] 36TC at page 225 Lord Simonds said:

“To say that a transaction is or is not an adventure in the nature of trade is to say that it has or has not the characteristics which distinguish such an adventure”.

The extended meaning in Section 832 (1) is wide enough to bring within trading income:

• an isolated transaction; see, for example, CIR v Fraser [1942] 24TC498, and
• a speculative adventure that yields an unexpected profit; see Wisdom v Chamberlain [1968] 45TC92.

However, not every isolated transaction or speculative adventure that yields a profit will be trading income. For example, see Leeming v Jones [1930] 15TC333.

The profit has to be of an income nature and not a capital accretion and to decide this issue you will have to examine all the surrounding facts and circumstances.

Further guidance on the factors to be considered is at BIM20200 onwards.