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The principles enunciated by Lord Wilberforce in Ramsay could have been confined to cases of artificial schemes designed to avoid tax, where the transactions were essentially circular. In Furniss v Dawson¹ the House of Lords had to consider a scheme which was designed to defer tax rather than to avoid it, which was a linear rather than a circular series of transactions, ie there was a genuine commercial transaction (a sale of shares), but it was preceded by a transaction (a share exchange with an offshore company) made with the sole purpose of deferring the capital gains tax on the main transaction. Accordingly, the series of transactions brought about a permanently different state of affairs and was not self-cancelling. Nevertheless, the Lords applied the Ramsay approach.

In a judgment which has attracted significant subsequent criticism, Lord Brightman explained the Ramsay principle as follows²:

'My Lords, in my opinion the rationale of the new approach is this. In a pre-planned tax saving scheme, no distinction is to be drawn for fiscal purposes, because none exists