Words and Phrases - "trading stock"
Fraser v. London Sports Car Centre Ltd., [1984] BTC 409 (HC), aff'd [1985] BTC 547 (C.A.)
Sports cars that were supplied to a motor vehicle dealer subject to reservation of title by the supplier, were brought into account in computing the dealer's profits for accounting purposes, and thus were included in "the value of its trading stock" for the purpose of obtaining stock relief under section 37 of the Finance Act 1976. Nicholls J., could "see nothing in the phrase 'its trading stock' ... to suggest that if, unusually, a trader does not own the stock with which it trades that stock cannot be as much part of its trading stock as the stock of which it is the absolute owner."
Reed v. Nova Securities Ltd., [1985] BTC 121 (HL)
As interpreted in General Motors Acceptance Corporation (U.K.) Ltd. v. IRC, [1987] BTC 71 (C.A.).
Shares acquired by the taxpayer did not constitute trading stock (which was defined as "property such as is sold in the ordinary course of the trade") because they were worthless, and thus unsaleable. Lord Templeman stated (at p.127): "If a company is to acquire an asset as trading stock, the asset must be not only of a kind which is sold in the ordinary course of the company's trade but must also be acquired for the purposes of that trade with a view to resale at a profit. A company which acquired an asset for purposes other than trading would not, in my opinion, acquire the asset as trading stock even though the company habitually traded in similar assets."