The scope of a trade is essentially a question of fact. The
approach adopted by the courts is to establish the person's stated
intention and then consider whether the facts support that
intention or not.
As Atkin L.J. noted in Collins v The Firth-Brearley Stainless
Steel Syndicate Ltd [1925] 9TC520, (see
BIM21040), at p. 573:
" The question arises as to what was the trade of that Syndicate, because that it indeed carried on a trade I think cannot be disputed. But the question is what was the scope of the trade. For that purpose I think in order to examine the facts you must look at what the company purported to do, and also what it did in fact."
The stated intention of a person is not conclusive. Where it is at odds with the objective facts it can be disregarded. In CIR v The Hyndland Investment Co Ltd [1929] 14TC694, a case that concerned whether or not a property company was carrying on a trade, Lord President Clyde noted, at p. 699:
"… the question is not what business does the taxpayer profess to carry on, but what business does he actually carry on."
However, in marginal or equivocal situations the intention of the person is a factor to consider in determining what it is that their actions amount to.
