Lexis+® UK Tax is grateful to Nigel Doran of Macfarlanes LLP for his comments on an earlier draft of this Practice Note. However, the views expressed are those of Lexis+® UK Tax.

The Ramsay principle is an approach to statutory interpretation that has been developed by the courts in cases involving tax avoidance. For a general introduction to the Ramsay principle, see Practice Note: Ramsay as a guide to statutory construction.

This Practice Note is about cases in which the courts have applied the Ramsay principle in order to take a realistic view of what have become known as composite transactions, ie transactions that involve a number of steps, designed to operate together to produce a particular outcome. Other themes that have developed in cases in which a Ramsay analysis has been applied to the facts are discussed in Practice Note: Ramsay—reality and legal form.

Composite transactions have been divided into two categories:

1. •

   circular, self-cancelling transactions—transactions undertaken purely for tax reasons, in which typically the taxpayer would be in the same position (ignoring tax considerations) at the end as