Craven v. White, [1988] BTC 268 (HL)

Lord Oliver stated:

"As the law currently stands, the essentials emerging from Furniss v. Dawson appear to me to be four in number:

1. that the series of transactions was, at the time when the intermediate transaction was entered into it, preordained in order to produce a given result;
2. that the transaction had no other purpose than tax mitigation;
3. that there was at that time no practical likelihood that the pre-planned events would not take place in the order ordained, so that the intermediate transaction was not even contemplated practically as having an independent life, and
4. that the pre-ordained events did in fact take place."

With respect to the transfer of shares to a Manx company in exchange for treasury shares of the Manx company, followed by the sale of the shares by the Manx company to the ultimate purchaser, it was uncertain at the time of the transfer of the shares to the Manx company that the subsequent disposal would occur, and it was only later that negotiations with the ultimate purchaser were resumed. The Ramsay principle accordingly was not applied.

Lord Jauncey stated:

"If it were appropriate to prepare a formula defining 'composite transaction' in the light of the passages in the speeches in Ramsay, Burmah and Dawson to which I have referred I should be tempted to suggest the following:

'A step in a linear transaction which has no business purpose apart from the avoidance or deferment of tax liability will be treated as forming part of a pre-ordained series of transactions or of a composite transaction if it was taken at a time when negotiations or arrangements for the carrying through as a continuous process of a subsequent transaction which actually takes place had reached a stage when there was no real likelihood that such subsequent transaction would not take place and if thereafter such negotiations or arrangements were carried through to completion without genuine interruption.'"