Badges of trade (UK tax)
Badges of trade are indicators used in deciding whether transactions constitute a trade. Relevant factors include profit motive, frequency, the nature of the asset, the way it is financed or sold and the length of ownership. No single factor is conclusive; the facts must be considered together.
Worked example
A person repeatedly buys similar items, improves them and promptly sells them for profit. Those factors point towards trading, but the adviser considers the complete facts before deciding.
Common mistake
Treating a profit motive or a single factor as automatically conclusive proof of trading.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |