BIM20250 - Trade: badges of trade: income-producing assets
If an asset yields an income, for example, rent or dividends, then the initial presumption is that it is more likely to be an investment than if it produces no income.
However, the income has to be considered alongside any expenses associated with the transaction. For example, if the purchase of the asset is financed by borrowings on which interest is payable, then that outgoing may match or even greatly outweigh the income so that the income bearing nature of the asset becomes of much less, or no, importance. In other words, any intended benefit to the person can only come from the actual realisation of the asset, which would allow the loan to be repaid. The income merely reducing the outgoings until that surplus is available. See, for example, Cooke v Haddock  39TC64.
No income yield
The fact that an asset does not produce income before realisation is no more than a pointer to the possibility that it is held as a trading asset. Some types of asset, which clearly can be held for investment, are specifically designed so as to produce little or no income. The benefit to the holder comes as an enhancement in the capital value of the asset.
In Marson v Morton and Others  59TC381 at page 393F the vice-chancellor commented on this factor as follows:
Since the arrival of inflation and high rates of tax on income new approaches to investment have emerged putting the emphasis in investment on the making of capital profit at the expense of income yield. For example, the purchase of short-dated stocks giving a capital yield to redemption but no income has become commonplace. Similarly, split level investment trusts have been invented which produce capital profits on one type of share and income on another. Again, institutions now purchase works of art by way of investment. In my judgement those are plainly not trading deals; yet no income is produced from them.
Normally transactions by individuals and companies in financial assets, such as shares, options and futures, do not amount to trading for tax purposes. Shares are generally held for investment, either to gain from income or capital growth. Short-term transactions, which cannot be classed as investments, usually fall short of trading, being in a class of transaction analogous to gambling or speculation. If you have a case of this kind please refer to BIM20252 and BIM65701.
Land, more than most other assets, is capable of functioning both as an investment or as trading stock. It is not uncommon for it to be held as an investment and not yield an income, or to produce income and yet be held as trading stock. The treatment of land transactions is considered in detail at BIM60000 onwards.