A company had devised two elaborate schemes with a view to avoiding income tax. Lord Wilberforce discussed the definition of ‘trade’: ‘`Trade’ cannot be precisely defined, but certain characteristics can be identified which trade normally has. Equally some indicia can be found which prevent a profit from being regarded as the profit of a trade. Sometimes the question whether an activity is to be found to be a trade becomes a matter of degree, of frequency, of organisation, even of intention, and in such cases it is for the fact-finding body to decide on the evidence whether a line is passed.’
Lord Simon of Glaisdale said that between the two extremes there lies a ‘no-man’s land’ of fact and degree where it is for the commissioners to evaluate whether the activity amounts to a trade or not. The court can only interfere where the degree of fact is so inclined towards one frontier or the other as to lead it to believe that there is only one conclusion to which the commissioners could reasonably have come.’
Lord Wilberforce said that organisation is not decisive in setting status for tax purposes: ‘organisation’ as such is not a principle of taxation: ‘All depends on what you organise.’
Lord Morris of Borth-y-Gest said that: ‘it seems to me to be essential to discover and to examine what exactly it was that the person did’.
Judges:
Lord Reid, Lord Wilberforce, Lord Simon of Glaisdale, Lord Morris of Borth-y-Gest, Lord Cross of Chelsea
Citations:
[1974] UKHL 5, [1974] 1 WLR 1594, [1974] STC 539, [1974] TR 281, [1974] 3 All ER 949
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Sharkey v Wernher HL 1955
Where a trader takes stock from his business for private use or for use in another business which he owns, or where he transfers to his business stock which he owns in some other capacity than that of proprietor of that business, the transfer should . .
Cited – Heydon’s Case 1584
Mischief rule of Iinterpretation
Lord Coke stated the basis of the mischief rule of interpretation: ‘For the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law), four things are to be discerned and . .
At First Instance – Ransom v Higgs 1973
. .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 09 July 2022; Ref: scu.248608