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Silver Tax: Norman Wisdom's real legacy

We were saddened to learn of the death of Norman Wisdom. We hope it will not be thought tasteless to mark his passing by reminding readers of the important tax case bearing his name - Wisdom v Chamberlain 45 TC 92.

In 1961 Mr Wisdom feared devaluation of the pound. As a short-term hedge against devaluation he borrowed a large sum of money and purchased a quantity of silver bullion. On sale less than a year later he realized a substantial profit. The Court of Appeal held that the profit was subject to Income Tax as resulting from an adventure in the nature of trade: although the transaction might well be described as a "hedge" or as a "speculation" neither description was incompatible with trading.

The case remains relevant today, as taxpayers increasingly look to invest for capital gain to mitigate the effects of high income tax rates. However, the inconvenient truth is that buying an asset in the hope of selling it in the short term at a gain is likely to give rise not to capital gain (which of course was tax-free in 1961) but income. Caveat emptor (atque vendor).