The Ramsay principle

The Ramsay principle (or Ramsay doctrine) refers to an approach to statutory interpretation that has been developed by the courts in cases involving tax avoidance. It began with the landmark decision by the House of Lords in WT Ramsay [1981] STC 174.

The Ramsay principle can be summarised as:

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look at the law—what did Parliament intend when it chose those words?
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look at the facts—should an individual transaction be considered as part of a wider context?
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in light of the first two steps, how does the law apply to these facts?

There is a large body of case law dealing with the Ramsay principle. For a general introduction to the subject, see Practice Note: Ramsay as a guide to statutory construction, and, for a list of cases that have been important in the development of the principle, see Practice Note: Ramsay case law—chronology and cheat sheet.

The Ramsay principle has not been applied to VAT. VAT has historically been governed by EU law principles and the case law approach to VAT avoidance instead takes its name from a

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Latest Tax News

Tax weekly highlights—5 December 2024

This week's edition of Tax weekly highlights includes: (1) key announcements from the Scottish government’s 2025–26 Budget, (2) News Analyses of the FTT’s decisions in L v HMRC, Stage One Creative Services and Rupert Grint, (3) HMRC’s latest Stakeholder Digest and (4) the European Commission closing state aid investigations into Amazon, Fiat and Starbucks.

FTT holds that sales of occupation income provisions applied to capital sum received by the taxpayer (Rupert Grint v HMRC)

Tax analysis: In Rupert Grint v HMRC, the First-tier Tax Tribunal (FTT) found that the sales of occupation income anti-avoidance rules applied to a capital sum received by the taxpayer on the incorporation of his business. The anti-avoidance provisions were engaged as, although there were commercial reasons for the incorporation, one of the main objects of the arrangements was the avoidance or a reduction in income tax. The FTT also held that the closure notice was validly issued despite referring to the wrong legislative provision.

FTT holds discrimination settlement payment not taxable (L v HMRC)

Tax analysis: In L v HMRC, the First-tier Tax Tribunal (FTT) held that the part of a settlement payment which related to a discrimination claim fell outside the scope of income tax. This was on the basis that the payment was not ‘from employment’; instead it was made because the discrimination had deprived the former employee of the opportunity to perform her full role, causing financial loss.

FTT allows taxpayer’s R&D appeal (Stage One Creative Services Ltd v HMRC)

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