In R Stayton v HMRC [2016] TC05104 the First Tier Tribunal (FTT) found that a property developer’s wife who sold a house she never lived in was not trading.

  • The taxpayer was married to a property developer.
  • In April 2005 she bought a house with the intention of living there.
  • The house was renovated by her husband’s company, financed by a loan made to the company which the taxpayer guaranteed.
  • Boundary disputes with her neighbours led to a change of plans and the house was sold in May 2007.

The taxpayer argued that despite her initial intention, the disposal was a trading transaction.  HMRC disagreed, claiming CGT was due and imposed penalties for failure to notify and submitting an incorrect return.

The FTT observed that:

  • A person’s original intention cannot outweigh all other facts.  There can be a trade even if a taxpayer enters into the project with some other motivation.
  • Normally a taxpayer who acquires a single property without the intention of trading in that property is not engaged in a trade.
  • It is possible for intentions to change, but that would be unusual in the case of land unless there was a pre-existing trade of dealing in land into which the asset was subsumed.

Applying the Badges of Trade to the facts of the case, the FTT found that:

  • This was a single transaction, with no clear evidence of an intention to repeat it.
  • The transaction was not related to any trade carried on by the taxpayer.
  • The taxpayer did not have the involvement in the property which would be typical of a property developer.  Instead her husband and his company appeared to direct most work and her involvement was only that of a house owner.
  • The financing of the transaction was no different to a mortgage.
  • The property was purchased with the intention that the taxpayer would move in.

When looked at overall the FTT found that it was clear the taxpayer was not trading.  Instead the house was a capital asset and subject to CGT on disposal.


This was a slightly unusual case, in that the normal roles were reversed with HMRC arguing capital treatment and the taxpayer income.  The reason for claiming she was trading lay in the fact that the taxpayer had significant interest expenses.


Our subscriber guide Badges of Trade: are you trading or not?

Case reference: R Stayton v HMRC [2016] UKFTT TC05104