CTM06540 - Corporation Tax: company purchase schemes: ‘reasonable to infer� test
CTA10/714 (1) to (3)
»Ê¹ÚÌåÓýapp effect of the ‘reasonable to inferâ€� test in CTA10/S714 (1) to (3) is that the reasonable inference to be drawn is that of a hypothetical observer with full knowledge of the terms of the transactions and the surrounding circumstances. It follows that if this condition is to be met, all documents relating to the transactions and the surrounding circumstances (including all background documents, correspondence and so forth) must be obtained and an inference made taking all factors into account.
If, for example, it is found that the price to be paid for a company is significantly higher than the company is worth on the open market (likely because the purchaser stands to benefit from the unpaid tax) the condition in CTA10/S714 (1) to (3) is likely to be met.