Ramsay principle on composite transactions applies only where steps form one preordained scheme and later disposal is effectively certain.

The Ramsay principle, as extended in Furniss v Dawson, applies only on a true construction of the charging provision where the relevant steps form a preordained composite transaction intended to operate as one scheme. A tax-avoidance step is disregarded only if, at the material time, the later disposal was in practical terms part of the same indivisible arrangement and not merely contemplated. A mere tax-saving motive, or a preparatory step followed by a later independent sale, is insufficient. On the facts discussed, the Bowater and Gregory transactions failed the composite-transaction test because of genuine interruption and uncertainty, and the Craven transaction also lacked sufficient certainty and interdependence.

---

---

Issues: Whether the Ramsay principle, as extended in Furniss v. Dawson, applied to the disputed share exchanges and land transactions so as to treat the later disposals as direct disposals by the taxpayers, and whether the transactions were part of a preordained composite scheme lacking an independent commercial purpose.

Analysis: The governing approach was held to be one of statutory construction: the court must identify whether the relevant steps, viewed as a whole, formed a single composite transaction or a series of independent transactions. The principle applied where a tax-avoidance step was inserted into a preordained sequence intended to operate as one scheme and there was no real likelihood, at the time of the first step, that the later step would not occur. A mere motive to save tax, or an isolated preparatory transaction followed much later by an independent sale, was not enough. On the facts, the Bowater and Gregory appeals did not satisfy the composite-transaction test because the later sales were separated by genuine interruptions and uncertainty, while the Craven transaction, though closer, still lacked the level of certainty and interdependence required to treat the intermediate transfer as part of one indivisible scheme.

Conclusion: The challenged transactions were not to be recharacterised as direct disposals by the taxpayers under the Ramsay-Furniss principle.

Ratio Decidendi: A tax-avoidance step is disregarded only where, on a true construction of the charging provision, the relevant events form a preordained composite transaction intended to operate as a single whole and the later disposition was, at the material time, not merely contemplated but in practical terms part of the same indivisible scheme.

---