Ramsay applies to transactions

The taxpayers took part in a scheme whereby they set up a company (WY) which would pay them as sole shareholders distributions without attracting the income tax charge usually applicable to dividends. This involved the creation of a subsidiary (WS) in which WY subscribed for 199 A shares and one B share. The latter was settled on trust for the benefit of the taxpayers on the basis that WY was entitled to receive a small amount of any income arising and the trust property was to revert to it.

The taxpayers said the dividend should be treated as the income of WY as settlor.

HMRC disagreed saying the taxpayers were the settlors and were responsible for the arrangements. Referring to the Ramsay principle taking a realistic view of the facts the case involved a series of pre-ordained transactions or a composite scheme which was designed...