BIM53251 | Particular trades: commodity transactions

Trade profits or capital gains?

Transactions in commodities may take the following forms:

1. actual purchases and sales of a commodity;

2. 'futures' contracts where there is frequently no intention of supplying or taking delivery of the commodity on maturity of the contract;

3. a combination of (a) and (b) above.

Where a person enters directly into transactions involving the purchase and sale of a commodity, the profit is normally chargeable as profits from 'a venture in the nature of trade' (see CIR v Fraser [1942] 24 TC 498, and Wisdom v Chamberlain [1968] 45 TC 92).

Futures contracts entered into by a company are dealt with under the derivative contracts regime. See CFM50000 onwards.

Profits from transactions in commodity futures on a 'recognised futures exchange' made by non-corporate taxpayers are, unless they are trade profits, treated as chargeable gains (see CG56004).