W.T. Ramsay V Cir

54 TC 101; [1981] STC 174; [1981] 2 WLR 449; [1981] 1 All ER 865

The Ramsay case involved a company which had incurred an agreed gain on the sale of a farm. It then entered into an avoidance scheme designed to produce an allowable loss to set off against the gain. The scheme removed value from a chargeable asset (shares) to produce an allowable loss on their disposal. The value passed into a loan which was also disposed of.  The taxpayer contended that this was not a debt on a security and, consequently, it would not be a chargeable asset and, therefore, not liable to CGT. 

The House of Lords held that the loan did amount to a debt on a security. The gain on the disposal of the loan was therefore a chargeable gain and the scheme failed.

The Ramsay principle, as it has become known, established the principle which involves looking beyond the individual components of an arrangement and applying the relevant legislation to the series of transactions as a whole.