The Ramsay Principle
The most important background to Furniss v. Dawson was the decision of the House of Lords a few years earlier in W. T. Ramsay Ltd. v. Inland Revenue Commissioners A. C. 300. In the Ramsay case, a company which had made a substantial capital gain had entered into a complex and self-cancelling series of transactions which had generated an artificial capital loss. The House of Lords decided that where a transaction has pre-arranged artificial steps which serve no commercial purpose other than to save tax, then the proper approach is to tax the effect of the transaction as a whole.
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