Why British Law Doesn't Define 'Sole Trader'

I was recently asked if I knew which British legislation first defined ‘sole trader.’ The person asking said that Gro[n]k had referred them to the repealed Business Names Act 1985 (UK), but that they couldn’t find the term in the Act at all. (It does not appear in the Act.)

My initial suggestion was to simply search the usual databases: legislation.gov.uk and BAILII. The earliest legislative reference to ‘sole trader’ I found was in the repealed Income and Corporation Taxes Act 1988 (UK)¹ but it was not defined in that Act. Similarly, ‘sole proprietor’ is not defined in the earliest relevant legislative reference I found to that term.²

After giving it a little more thought I began to doubt that a legislative definition was even necessary.

A sole trader (or sole proprietor) is the simplest business structure. Any natural person engaged in commerce who is directly entitled to all profits and liable for all losses of the business is a sole trader.

Employment and taxation laws apply to sole traders, but they are not subject to special ‘regulations, disclosure, or public accountability requirements, nor are there rules governing the conduct of the business.’³ Sole traders are also bound by the business name disclosure requirements in the Companies Act 2006 (UK), which ‘applies to an individual or partnership carrying on business in the United Kingdom under a business name.’⁴ Note that the term ‘individual … carrying on business’ is used rather than ‘sole trader’ or ‘sole proprietor.’

In 2015–16, the Office of Tax Simplification noted in two separate reports that self-employed people are described in many different ways, including ‘sole trader’ and ‘sole proprietor’, but that there is no legal definition in statute or otherwise:

There are a myriad of descriptions for the self-employed including freelancer, sole trader, contractor, sub-contractor, consultant, etc. but there is no statutory definition. These many labels, which have no statutory basis, only serve to create further confusion and to add to the complexity.⁵

The Office describes a sole trader as simply ‘an individual carrying on business as an unincorporated entity.’⁶ Similarly, the Senior Traffic Commissioner’s statutory guidance describes a sole trader as ‘an individual trading on his or her own account.’⁷

In essence, there is no need for a statutory definition because the meaning is plain. Sole traders are individuals operating businesses as individuals. That is the ‘default’ mode for a business. Everything else (partnerships, limited partnerships, companies, and so on) is defined in opposition to that assumption.