BIM53251 - Commodity transactions

Case I Schedule D or Capital Gains?

Transactions in commodities may take the following forms

1. Actual purchases and sales of a commodity.
2. `Futures' contracts where there is frequently no intention of supplying or taking delivery of the commodity on maturity of the contract.
3. A combination of (a) and (b) above.

Where a person enters directly into transactions involving the purchase and sale of a commodity, the profit will normally fall to be assessed under Case I of Schedule D as profits from `an adventure or concern in the nature of trade' (see CIR v Fraser [1942] 24TC498, and Wisdom v Chamberlain [1968] 45TC92).

Profits from transactions in commodity futures were, before 6 April 1985, normally assessable under Case I or Case VI of Schedule D (see Cooper v Stubbs [1925] 10TC29, and Townsend v Grundy [1933] 18TC140). The question of whether Case I or Case VI was appropriate was influenced by the number and scale of the transactions and the degree of organisation involved.

Profits arising on or after 6 April 1985 from transactions in commodity futures on a `recognised futures exchange' are, unless they fall within Case I of Schedule D, treated as chargeable gains (see CG56004). Accordingly, with effect from 6 April 1985, the Case VI option is no longer available for such transactions.