Revenue has updated its guidance on the main purpose tests to explain the application of the 'reasonable to consider' test and to clarify how the objective tests should apply. The guidance outlines that the essence of the ‘reasonable to consider’ test is to assess whether the taxpayer has genuinely considered the tax consequences of a transaction in the same manner as a reasonable taxpayer would do so.
The objective ‘main purpose’ test applies to disclosures of a transaction under the mandatory disclosure regime and when assessing a transaction in light of the anti-avoidance provisions under section 811C TCA 1997. When applying a main purpose test, the guidelines outline that it is first necessary to determine if it is objective (what a reasonable man on the street would think) or subjective (what did the taxpayer actually have in mind).
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