Craven v White
The Ramsay principle applies only where, at the time of an intermediate transaction, the later transactions were pre-ordained, in the sense that there was no practical likelihood that they would not take place.
Facts
The taxpayers, who owned shares in a company, were negotiating with two possible purchasers. They exchanged their shares for shares in an Isle of Man company, which later sold the shares to one of the purchasers. At the time of the share exchange, the final sale had not been agreed, and negotiations with the purchaser were not concluded until some time later. The Inland Revenue argued that, under Furniss v Dawson, the interposition of the Isle of Man company should be disregarded, so that the taxpayers were liable to capital gains tax as if they had sold their shares directly to the purchaser.
Legal principle
The House of Lords held, by a majority, that the Ramsay principle did not apply. Lord Oliver said that the principle could apply only where, at the time when the intermediate transaction was entered into, the series of transactions was pre-ordained in order to produce a given result, the transaction had no other purpose than tax mitigation, there was at that time no practical likelihood that the pre-planned events would not take place in the order ordained, and the pre-ordained events did in fact take place. Here, the final sale had not been arranged at the time of the share exchange, so the steps could not be regarded as a single composite transaction. The decision limited the scope of the principle.
Related cases on tax avoidance, statutory interpretation and the Ramsay principle
- Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51, [2005] 1 AC 684
- Cadbury Schweppes plc v Commissioners of Inland Revenue (2006) Case C-196/04
- Furniss v Dawson [1984] AC 474
- Inland Revenue Commissioners v Duke of Westminster [1936] AC 1
- MacNiven v Westmoreland Investments Ltd [2001] UKHL 6, [2003] 1 AC 311
- UBS AG v Revenue and Customs Commissioners [2016] UKSC 13
- WT Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300
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