It will generally be clear whether a person is carrying on a trade, although there will always be grey areas of uncertainty. There is little help to be found in the tax law which says that the term ‘trade’ includes every, trade, manufacture, adventure or concern in the nature of trade. Tax advisors therefore must look carefully of the facts of each case and consider guidance available from all sources.
An extensive body of case law has developed over the years on what constitutes a trading activity. In addition, the Royal Commission for the Taxation of Profits and Income identified certain ‘badges of trade’ in 1955.
Subsequently, in Marson v Morton, a total of nine badges were cited. These include:
1. Profit seeking motive
2. The number of transactions
3. The nature of the asset
4. Existence of similar trading transactions or interests
5. Changes to the asset
6. The way the sale was carried out
7. The source of finance
8. Interval of time between purchase and sale
9. Method of acquisition
Another possible factor to consider was identified in Eclipse Film Partners No. 35 LLP v Revenue and Customs  UKFTT 270 (TC).
In this case the question to be decided was whether the individual members of Eclipse 35 would be entitled to tax relief for interest paid on borrowings to contribute capital to the partnership. The capital was used wholly for the purposes of a trade carried on by the partnership.
The Eclipse 35 case is relatively complex and long (73 pages), and the background to the transactions entered into by the partnership were specific to the particular case. On the general issue of whether Eclipse 35 was carrying on a trade, it was held that a ‘trade’ requires a degree of speculation.
Whilst this decision is not binding in Ireland, it is interesting that that ‘speculation’ could represent a further badge of trade.