In Nicholas Henderson v HMRC [2023] TC8755, the First Tier Tribunal (FTT) found the buying and selling of shares did not amount to a trade. Losses from that activity could not be offset against other income.

  • In 2014, Mr Henderson inherited a substantial sum of money which resulted in him retiring from a professional partnership.
  • Mr Henderson started making more acquisitions and disposals of shares with a view of providing an income.
  • Losses were made on the share dealing.
  • Trading Loss Relief was claimed against his other income.
  • After raising an enquiry, HMRC issued closure notices denying the loss relief claim.
  • Mr Henderson Appealed to the FTT.

The FTT found that Mr Henderson was not trading as:

  • Share trading is presumed to be a non-trading activity unless the circumstances proved otherwise.
  • When considering the Badges of Trade:
    • The number and frequency of trades was not indicative of trading:
      • The number of trades, on average one trade per week, while not conclusive was indicative that the activity was not trading.
    • The time spent by Mr Henderson did not support the contention he was trading as:
      • One-two hours per day on average were spent on the activity.
      • Time was spent ad-hoc and around his other interests.
    • The organisation and commerciality of the activity did not suggest it was a trade as:
      • The business plan was to purchase shares which would appreciate in value in the short term.
      • The evidence did not indicate a significant degree of organisation or the required considered and systematic approach.
      • Insufficient time was spent on the activity to achieve the stated goals.
      • There was no evidence of how the planned returns would be achieved.
    • Transactions in prior years had been returned as capital disposals.

The appeal was dismissed.

Useful guides on this topic

Badges of Trade: Are you trading or not
Are you trading, running a business, or just buying and selling investments? The 'Badges of Trade' are a set of indicators, built up over time by the courts, to decide when an activity is a trading or investment activity.

Losses, trade losses and sideways relief
How can trade losses be utilised? What are the restrictions?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

Nicholas Henderson v HMRC [2023] TC8755

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