Ramsay principle: disregard pre ordained, commercially purposeless steps to tax the substantive composite transaction.
Splitting composite contracts to fragment taxable income is assessed under the Ramsay Principle, which allows courts to regard a pre-ordained series of transactions as a single composite transaction and to disregard inserted steps lacking independent commercial purpose other than tax avoidance; where such pre-ordination and lack of business effect are established, the court may collapse the series and tax the substantive result. (AI Summary)