INTM550640 - Hybrids: definition of key terms: reasonable to suppose

Many of the conditions in Part 6A include a test of whether it is “reasonable to suppose” something. There is no definition of this phrase in Part 6A, so it takes its ordinary meaning.

In general terms the test does not require knowledge of the actual outcome or position, but a rational, justifiable and credible view of the likely outcome or position. Whilst it will depend on context, this supposition should be based on facts and circumstances that are either already established, or which might reasonably be expected to be ascertained in considering the application of Part 6A.

The test is intended to facilitate the submission of a compliant tax return by persons to whom the hybrid mismatch rules may apply so that, for example, it is not necessary for the parties to await final resolution of the relevant tax return for a counterparty or to establish the final outcome of the application of tax law to a specific case in another jurisdiction.

Applying the test is straightforward when all the relevant facts are known. In other circumstances it may be reasonable to expect that further facts or information be obtained in order for a reasonable supposition to be made. For example, in order to meet the test, it may be necessary to obtain information from other entities in the same control group or from other parties in a structured arrangement. Each instance will be fact dependant.

The application of Part 6A is part of the customer’s self-assessment, so in the first instance it will be for the customer to decide what it is reasonable to suppose in relation to the relevant facts and circumstances.