Badges of trade
In this lesson, you'll learn how to identify whether an individual is trading or not—a critical distinction in taxation that determines whether profits are taxed as income or capital gains.
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In this lesson
- 0:00 Badges of trade: determining trading status
- 0:41 Nine key badges of trade explained
- 1:10 Profit motive and transaction frequency
- 2:01 Asset nature and modifications
- 3:02 Sale method and financing factors
- 3:47 Time interval and acquisition method
About this lesson
HMRC uses a set of factors called the badges of trade to make this assessment, and you'll work through each one systematically: profit-seeking motive, number of transactions, nature of the asset, similarity to existing trades, modifications made to the asset, how the sale was conducted, source of finance, timing between purchase and sale, and method of acquisition. Rather than relying on any single factor, you'll learn to weigh the evidence across all relevant badges to build a reasoned conclusion. This is essential knowledge for the Taxation paper, where you'll need to advise clients and justify your position on trading status using these established criteria.
Duration: 4m
Transcript
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