Polyurethane foams are widely used materials and control of their physical properties is a significant challenge. Management of cyclo-trimerisation during the polymerisation process is vital when tailoring the mechanical properties of the foam. Proazaphosphatranes are known to efficiently catalyse the cyclo-trimerisation of organic isocyanates, giving high purity isocyanurate with little uretdione by-product. The mechanism of this catalysis was previously unknown, although some zwitterionic intermediates have been identified spectroscopically. We have investigated a nucleophilic-catalysis reaction pathway involving sequential addition of methyl isocyanate to activated zwitterionic intermediates using density functional theory calculations. Evidence for significant transannulation by the proazaphosphatrane nitrogen was found for all intermediates, offering stabilisation of the phosphonium cation. Steric crowding at the proazaphosphatrane nucleophilic phosphorus gives rise to a preference for direct isocyanurate formation rather than via the uretdione, in sharp contrast to the uncatalysed system which has been found to preferentially proceed via the kinetic uretdione product. The investigations suggest the mechanism of proazaphosphatrane catalysed cyclo-oligomerisation does not proceed via the uretdione product, and hence why little of this impurity is observed experimentally.