INTM561120 - Hybrids: other provisions - adjustments in light of subsequent events: adjustments where suppositions cease to be reasonable

S259L applies to adjust the tax consequence where a counteraction under Part 6A was applied, but where the supposition upon which that adjustment depended turns out to be incorrect, and subsequent additional information suggests that the targeted mismatch was of a lesser amount with different tax consequences.

There are numerous situations where the application of the rules depends upon whether it is reasonable to suppose that a targeted mismatch would arise, or that an equivalent provision under the law of a non-UK territory would not apply to address that mismatch.

There are several reasons why the rules rely on the making of reasonable suppositions. The question of whether a corresponding receipt actually becomes included in ordinary income or whether a non-UK territory applies a corresponding counteraction, for example, may not be answered until a significant time after a UK company has to make its self-assessment.

The rules are not intended to cause double taxation unnecessarily, and where it is later established that a supposition made for the purposes of applying Part6A is incorrect, a just and reasonable adjustment can be made under s259L.

The adjustment can be made by means of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise. The time limits which apply are those which are relevant to the adjustment necessary and to the company to which the counteraction was applied. The aim of these provisions is to give flexibility in determining how a just and reasonable adjustment can be given effect

S259L does not apply in circumstances to which s259LA applies, see INTM561130.