The courts have battled for many years with the tension that exists between the position where a person is allowed to organise their tax affairs to ensure they pay less tax than he might otherwise pay and the position where a person enters into one or more (often circular) transactions with the sole aim of avoiding the payment of tax.

It was thought that the capital gains tax case of Ramsay v IRC had laid down a principle whereby a transaction that was ultimately self-cancelling and entered into for reasons of tax avoidance could be struck down by the courts, regardless of what the statute actually said.