Question：There are a number of tests that HMRC use to determine whether an individual is trading. These tests are known as the 'Badges of Trade'.

Which 2 of the following indicate someone is trading?

A.Ownership of the asset for a long time prior to sale.

B.A large number of similar transactions.

C.Work done to an asset prior to sale.

D.Existence of a profit.

The correct answers are: A large number of similar transactions; Work done to an asset prior to sale.

【解析】Where an individual undertakes a large number of similar transactions this may indicate there is a trade whereas a one off transaction is more likely to be treated as capital in nature.

Where work is done to an asset prior to sale (i.e. to make it more marketable) this will usually indicate there is a trade.

The existence of a profit is not sufficient to indicate trading. It is the motive to make a profit that points to trading.

Ownership of an asset for a long time prior to sale will usually indicate an investment rather than a trade.