BIM20205 - Meaning of trade: badges of trade: summary

A summary of each 'badge of trade' is shown below with a brief pointer to its meaning.

  1. Profit-seeking motive
see BIM20210. An intention to make a profit supports trading, but by itself is not conclusive.
  1. The number of transactions
see BIM20230. Systematic and repeated transactions will support 'trade'.
  1. The nature of the asset
see BIM20245  Is the asset of such a type or amount that it can only be turned to advantage by a sale? Or did it yield an income or give 'pride of possession', for example, a picture for personal enjoyment?
  1. Existence of similar trading transactions or interests
see BIM20270  Transactions that are similar to those of an existing trade may themselves be trading.
  1. Changes to the asset
see BIM20275  Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?
  1. The way the sale was carried out
see BIM20280  Was the asset sold in a way that was typical of trading organisations? Alternatively, did it have to be sold to raise cash for an emergency?
  1. The source of finance
see BIM20300  Was money borrowed to buy the asset? Could the funds only be repaid by selling the asset?
  1. Interval of time between purchase and sale
see BIM20310  Assets that are the subject of trade will normally, but not always, be sold quickly. Therefore, an intention to resell an asset shortly after purchase will support trading. However, an asset, which is to be held indefinitely, is much less likely to be a subject of trade.
  1. Method of acquisition
see BIM20315  An asset that is acquired by inheritance, or as a gift, is less likely to be the subject of trade.

These 'badges' will not be present in every case and of those that are, some may point one way and some the other. The presence or absence of a particular badge is unlikely, by itself, to provide a conclusive answer to the question of whether or not there is a trade. The weight to be attached to each badge will depend on the precise circumstances.

The approach by the courts in using the badges of trade has been to decide questions of trade on the basis of the overall impression gained from a review of all the badges.