Property Trade or Investment Business?


Badges of Trade

In the recent case of Parveen Azam (TC 00928) the Tribunal found that the taxpayer was carrying on an investment business and not a property trade.
In this case, the taxpayer purchased 11 properties in a 4 year period with the intention to sell the properties immediately at a profit.  Due to the downturn in the property market, the properties did not sell and the taxpayer began to let the properties.
The taxpayer argued that the business consisted of a trade because the original intention was to sell the properties.  However, the Tribunal found that after purchasing several properties the taxpayer must have realised that they were not selling.  It follows that the taxpayers intention on the acquisition of further properties was to run a rental business.
Therefore the Tribunal concluded the taxpayer was not carrying on the trade of a property developer or dealer but carrying on an investment business.