HL 1984, 55 TC 324;  STC 153;  2 WLR 226;  1 All ER 530
The shareholders in two UK family companies wished to dispose of their shares and found an unconnected buyer for the shares and agreed a price. Before disposing of the shares, they exchanged them for shares in an Isle of Man company, which, in turn, were then sold to the agreed purchaser. The Inland Revenue raised capital gains tax assessments on the basis that the shares should be treated as having been disposed of directly and that the interposition of the Manx company had been done to take advantage of tax rules prevailing at the time and, consequently, purely for the avoidance of tax.
The House of Lords unanimously upheld the assessment, reversing the Special Commissioners’ decision). Applying the Ramsay principle, it was held that the transactions should be regarded as a single composite transaction. Lord Brightman held that the Ramsay principle applies where there was a pre-ordained series of transactions and steps were inserted purely for the avoidance of tax.