Mark Stolkin & Ors v The Commissioners for HMRC
[2024] UKFTT 160 (TC)
Nicholas Henderson v The Commissioners for HMRC
8 March 2023
[2023] UKFTT 281 (TC)
First-tier Tribunal
Mr. Henderson tried to claim tax losses on his share trading, saying it was a business. But the judge said it wasn't a real business because he didn't work at it enough, didn't have a proper plan, and wasn't organized like a real trader. He was just investing, not trading.
Key Facts
- •Mr. Henderson, a former partner in a professional firm, bought and sold shares from 2006, initially treating them as capital investments.
- •He inherited a substantial sum in mid-2014 and retired in 2016, intending to focus on share trading.
- •He resumed share trading using an 'execution-only' basis, making his own investment decisions.
- •In the tax years 2015/16, 2016/17, and 2017/18, he made a significant number of share transactions (194 total).
- •He claimed loss relief for losses in 2015/16 and 2016/17. HMRC argued the activities did not constitute a trade or were not commercially undertaken.
- •Mr. Henderson spent approximately 1-2 hours daily researching shares but did not have a formal business plan or rigorous systematic approach.
- •He did not consistently track his income or losses and had not sought tax advice before resuming his share dealing.
- •The maximum funds employed in share dealing at any time did not exceed £100,000.
Legal Principles
Whether an activity constitutes a trade is determined by considering the 'badges of trade' and overall impression, not a rigid definition.
Case law (Jerome Anderson [2018] UKUT 159 (TCC), Salt v Chamberlain [1979] 53 TC 143, Eclipse Film Partners No 35 LLP [2015] STC 1429)
For trade loss relief, the trade must be commercial, carried out on a commercial basis and with a view to profit realisation.
Income Tax Act 2007
In share dealing, the prima facie presumption is that the activity is not a trade; evidence is needed to rebut this.
Salt v Chamberlain [1979] STC 750
Outcomes
Appeal dismissed.
The Tribunal found that Mr. Henderson's share dealing activities did not constitute a trade, but rather the management of a personal investment portfolio. His activities lacked the organisation, commerciality, and time commitment typical of a trade. The number of transactions and time spent were insufficient to establish a trade, despite the substantial losses.