A Discussion on the Badges of Trade

1433 Words6 Pages
TUTOR: Mr. R. Brown
A project completed in partial fulfilment of the representation of the Bachelor of Science Degree in Business Administration.
University of Technology Jamaica. School of Business and Management.
St. Andrew, Jamaica.
Date Submitted: October 16, 2012

Badges of Trade discussion

In law the circumstances under which a trade can take place are referred to as the badges of trade. Badges of trade are important in accounting because non-trade transactions are taxed differently. Badges of trade originate in case law. Each case where the meaning of 'trade ' is an issue must be decided on its own facts. The approach of the Commissioners and the courts over the years has been to
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There were substantial tax arrears to be met.
By way of contrast, in Mitchell Bros v Tomlinson [1957] a change of intention was found to be justifiable, despite claims that the sales of former investment properties had been motivated by leasing becoming uneconomic. That is, an increase in repair costs and the need to realise the partnership on the death of a partner. However, in this case there was a great deal of other evidence that a trading intention had been established well before the partner died.

Another case that looks at the circumstances for realization is Jamaica sugar estate ltd v IT assessment committee 1948; the insurance money received from the British government in compensation for the loss of the company’s ships during the war was invested. When the company needed the money to make the progress payments for the building of a new ship, the form of investment was changed into one that was ready realisable to meet the progress payments. The interest received on this investment was not taxable as the court’s decision was that the company was not trading in stocks and shares.


And finally, motive is evidence that the sole object of acquiring an asset was to re-sell it at a profit, without any intention of holding it as an investment, is a pointer to the conclusion that a trade is being carried on. However, the presence of a profit-seeking motive is not necessarily a decisive pointer to the
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