Case law has drawn a distinction between 'equivocal' and
'unequivocal' transactions. See for example Iswera v CIR (1965),
1WLR668 (a Ceylonese Privy Council Case, copies of which are
available from Business Tax (Technical)), and Kirkham v Williams
[1991] 64TC253.
There are no hard and fast rules as to what makes a
transaction equivocal. The matter was considered in Kirkham v
Williams. In that case Lord Justice Nourse thought an equivocal or
ambiguous case was one in which the facts, when viewed on their
own, did not tell you whether the land was acquired as trading
stock or as a capital asset.
In 'unequivocal' or unambiguous cases the purchaser’s
actual intention is not conclusive (see Iswera v CIR).
However, a purchaser’s stated intentions, if made
before the Commissioners, may constitute evidence that they must
accept unless we can present sufficient counter evidence of a
trading intention. This is the function of the 'badges of trade'.
Where the transaction is equivocal the purchaser’s motive(s)
for entering into a transaction may determine the character of the
whole transaction.
This is a principle from Iswera quoted with approval in
Kirkham.
As a general rule we should, when the facts allow, argue that
the transaction was unequivocal. This means, identifying as many
badges of trading as possible.
