The transfer of shares to a subsidiary as part of a planned scheme immediately to transfer them to an outside purchaser was regarded as a taxable disposition to the outside purchaser rather than an exempt transfer to a group company. In defined conditions, including a preordained series of transactions including steps with no commercial or business purpose apart from the avoidance of a liability to tax, the court must look at the end result of a series of transactions: precisely how it would be taxed depended on the terms of the taxing statute.
Lord Brightman said: ‘First, there must be a pre-ordained series of transactions, or, if one likes, one single composite transaction. This composite transaction may or may not include the achievement of a legitimate commercial (i.e. business) end . . Secondly, there must be steps inserted which have no commercial (business) purpose apart from the avoidance of a liability to tax–not ‘no business effect.’ If those two ingredients exist, the inserted steps are to be disregarded for fiscal purposes. The court must then look at the end result. Precisely how the end result will be taxed will depend on the terms of the taxing statute sought to be applied.’
Lord Fraser said: ‘The true principle of the decision in Ramsay was that the fiscal consequences of a pre ordained series of transactions, intended to operate as such, are generally to be ascertained by considering the result of the series as a whole, and not by dissecting the scheme and considering each individual the dual transaction separately.’
Lord Brightman, Lord Fraser
 1 All ER 530,  AC 474,  UKHL 4
England and Wales
Extended – W T Ramsay Ltd v Inland Revenue Commissioners HL 12-Mar-1981
The taxpayers used schemes to create allowable losses, and now appealed assessment to tax. The schemes involved a series of transactions none of which were a sham, but which had the effect of cancelling each other out.
Held: If the true nature . .
Cited – Barclays Mercantile Business Finance Ltd v Mawson (HM Inspector of Taxes) HL 25-Nov-2004
The company had paid substantial sums out in establishing a gas pipeline, and claimed those sums against its tax as capital allowances. The transaction involved a sale and leaseback arrangement which the special commissioners had found to be a . .
Cited – Commissioners of Inland Revenue v McGuckian HL 21-May-1997
Steps which had been inserted into a commercial transaction, but which had no purpose other than the saving of tax are to be disregarded when assessing the tax effect of the scheme. The modern approach to statutory construction is to have regard to . .
Cited – Norglen Ltd (In Liquidation) v Reeds Rains Prudential Ltd and Others; Circuit Systems Ltd (In Liquidation) and Another v Zuken-Redac HL 1-Dec-1997
An assignment of a cause of action by a company in liquidation was valid, even though the dominant purpose was to avoid having to give security for costs, and to get legal aid. In dismissing the argument that the transactions were a device to defeat . .
Cited – Shimizu (UK) Ltd v Westminster City Council HL 11-Feb-1997
The removal of a listed building’s chimney stacks was an alteration allowing a claim for compensation. The phrases ‘alteration’ and ‘demolition’ are mutually exclusive. Although part of a building may be a listed building, a part of a listed . .
Cited – Belvedere Court Management Ltd v Frogmore Developments Ltd CA 24-Oct-1995
Landlords had sold flats to Frogmore without serving a section 5 notice under the 1987 Act. Prior to receipt of a purchase notice, Frogmore granted certain leases in the block of flats to another party.
Held: The agreements were upheld, and . .
Cited – UBS Ag and Another v Revenue and Customs SC 9-Mar-2016
UBS AG devised an employee bonus scheme to take advantage of the provisions of Chapter 2 of the 2003 Act, with the sole purpose other than tax avoidance, and such consequential advantages as would flow from tax avoidance. Several pre-ordained steps . .
Lists of cited by and citing cases may be incomplete.
Updated: 27 June 2022; Ref: scu.220502