UK: HMRC position on treatment of US LLC

HMRC brief on US LLC

HM Revenue & Customs published a brief, setting out the tax agency’s position following the UK Supreme Court’s decision in a case concerning U.S. limited liability companies (LLCs).

Related content

The brief sets forth how HMRC intends to interpret the decision in the Anson case, as follows:

  • When U.S. LLCs have been treated as companies within a group structure, HMRC will continue to treat the U.S. LLCs as companies, and when a U.S. LLC has itself been treated as carrying on a trade or business, HMRC will continue to treat the U.S. LLC as carrying on a trade or business.
  • HMRC proposes to continue the existing approach to determining whether a U.S. LLC is to be regarded as issuing share capital.
  • Individuals claiming double tax relief and relying on the Anson decision will be considered on a case-by-case basis. 

KPMG observation

HMRC appears to be interpreting the Anson decision narrowly, with the aim of maintaining the status quo. The brief suggests that HMRC will not question LLCs when they have been treated in a certain way unless a taxpayer seeks to claim double tax relief under an Anson-style argument, which will then be considered on a case-by-case basis. It also suggests that taxpayers have the ability to establish either an opaque or transparent LLC. 

It is unlikely that the brief will be the last word on this issue given the questions it raises, not least as to how it stands up against the decision itself, and legislation may be enacted in the future to put the issue beyond doubt. 

UK groups need to review the LLC agreements of their U.S. LLCs to see if they are worded in the same way as the U.S. LLC agreement in the Anson case. If so, they may need to consider the tax implications if the particular U.S. LLC was to be treated as transparent for UK tax purposes. For directly held U.S. LLCs, the UK resident company would be subject to corporation tax on its share of the U.S. LLC’s profits. Additional UK tax could be payable when the UK company has not already paid U.S. tax on the profits and/or if the measure of profits for UK tax purposes is greater than for U.S. tax purposes. When there could be additional UK tax, it may be worth considering unwinding or restructuring the particular arrangement.


Read an October 2015 report [PDF 817 KB] prepared by the KPMG member firm in the UK: Weekly Tax Matters (2 October 2015)

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