Edwards v Bairstow
An isolated purchase and resale of machinery for profit was an adventure in the nature of trade, and an appellate court can overturn a tribunal's finding where the only reasonable conclusion contradicts it.
Facts
Mr Bairstow and Mr Harrison bought a spinning plant, and resold it in a series of lots, making a profit. They had no previous experience of the trade in machinery, and had not intended to use the plant themselves, but intended to resell it at a profit. The General Commissioners held that the transaction was not an adventure in the nature of trade, and that the profit was not taxable as income. The Inland Revenue appealed by way of case stated.
Legal principle
The House of Lords held that the profit was taxable. Lord Radcliffe said that, although the question whether a transaction is an adventure in the nature of trade is a question of fact, the court can intervene if the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In such a case, the court would conclude that the commissioners had made an error of law. The only reasonable conclusion on the facts was that the transaction was an adventure in the nature of trade, because the taxpayers had bought the plant with the sole intention of reselling it at a profit. The case remains the leading authority on appeals from tax tribunals on questions of fact.
Related cases on income and corporation tax: employment, trading and residence
- Hochstrasser v Mayes [1960] AC 376
- Jones v Garnett [2007] UKHL 35
- Mallalieu v Drummond [1983] 2 AC 861
- Marks & Spencer plc v Halsey (2005) Case C-446/03
- Pepper v Hart [1993] AC 593
- R (Gaines-Cooper) v Revenue and Customs Commissioners [2011] UKSC 47
- RFC 2012 plc v Advocate General for Scotland [2017] UKSC 45
- Shilton v Wilmshurst [1991] 1 AC 684
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
