UK and International Tax news

HMRC Issues Interpretation Of SC Decision in Anson And US LLCs

Thursday 15th October 2015

HMRC has recently issued its response to the SC decision in Anson v HMRC [UKSC 44], which concerned entitlement to double tax relief on income remitted to the UK from the US [See our International Tax News item of 8 July 2015].

It has been HMRC’s general practice to tax a UK resident member of an LLC on the profits of the LLC only if and when those profits are distributed by the LLC to its members. In particular, it has treated a Delaware LLC as having ‘ordinary share capital’ for the purposes of s.832 TA88. Any tax paid in the US on the profits of the LLC is available for relief against UK tax only as underlying tax and only to a UK company which controls, directly or indirectly, at least 10% of the voting power in the LLC.

The SC unanimously allowed Mr Anson’s appeal by effectively treating the Delaware LLC as transparent for UK tax purposes and confirmed his entitlement to double tax relief on his share of profits which had been subject to US tax.

HMRC has after careful consideration concluded that the decision is specific to the facts found in that case. This means that where US LLCs have been treated as companies within a group structure, HMRC will continue to treat US LLCs as companies. Where a US LLC has itself been treated as carrying on a trade or business, HMRC will continue to treat the US LLC as carrying on a trade or business.

HMRC also proposes to continue its existing approach to determining whether a US LLC should be regarded as issuing share capital. Individuals claiming double tax relief and relying on the Anson v HMRC decision will be considered on a case by case basis.

If you would like to discuss the implications of this case, please contact Keith Rushen on +44 (0)20 7486 2378.

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