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Significant UK Sole Trader Cases

Welsh Development Agency v Export Finance Co Ltd (1992)

Sole traders are personally liable for business debts unless they have a legally distinct entity.

A trader attempted to shift liability to a business name but the court ruled they were personally responsible.

Cox v Coulson (1916)

Clarifies that a sole trader is personally liable unless they form a partnership or company.

A business dispute arose over financial obligations and the court ruled that liability rested with the individual not the business name.

Esso Petroleum Co Ltd v Mardon (1976)

Misrepresentation in business dealings can lead to damages even if the contract is upheld.

A sole trader entered a petrol station agreement based on false sales forecasts. The court awarded damages for misrepresentation.

Carlill v Carbolic Smoke Ball Co (1893)

Advertisements can create legally binding contracts if they contain clear promises.

A company advertised a money-back guarantee for a flu remedy. The court ruled this was a binding contract when a claimant sued.

Walker v Hirsch (1884)

Shows how a worker mistakenly classified as a partner had no rights as a sole trader.

A worker claimed partnership rights but the court ruled they were only an employee with no claim to business assets.

Elias v Mitchell (1972)

Sole traders must maintain accurate tax records to avoid penalties.

A trader failed to report income properly leading to significant tax penalties.

R v ICR Haulage Ltd (1944)

A sole trader can be held personally liable for fraudulent activities conducted in their business name.

A haulage firm was found guilty of fraud and the sole trader was personally convicted.

Bank of Scotland v Henry Butcher & Co (2001)

Confirms that operating under a business name does not protect a sole trader from personal liability.

A sole trader took out loans under a business name but the court ruled they were still personally responsible for the debts.

Shogun Finance Ltd v Hudson (2003)

Sole traders must verify identity when entering business contracts to avoid fraudulent transactions.

A fraudster bought a car using stolen identity documents and the trader was unable to recover the vehicle when the finance company reclaimed it.

Byrne v Van Tienhoven (1880)

Business offers cannot be revoked once the acceptance has been sent.

A business changed its mind about a deal but the court ruled that the contract was binding once the offer was accepted.

Ramsay v Inland Revenue Commissioners (1981)

Sole traders cannot use artificial tax avoidance schemes to reduce tax liability.

A businessman created complex transactions to avoid tax. The court ruled these were artificial and disregarded them for tax purposes.

Newstead v Frost (1980)

A sole trader's income tax liability depends on their true earnings even if they attempt to structure payments differently.

A celebrity tried to pay himself through a company structure but HMRC ruled that the income was still personal.

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