Posted by Nick Day on 07 Oct 2015
US Limited Liability Companies (LLCs): Swift Case
Following the UK Supreme Court’s decision in Anson v HMRC (the LLCs Swift case), which we commented on in our previous article of 7 July, HM Revenue & Customs (HMRC) has now published its view of the decision.
HMRC has confirmed that it will in broad terms continue to treat US LLCs as companies for UK tax purposes despite the taxpayer’s victory in the case, where the Court agreed that he had been doubly taxed on the “same income” and therefore was entitled to a credit for US taxes paid against his UK tax liability, which HMRC had previously sought to disallow.
HMRC in its response states that it considers the Court’s decision to be confined to the specific facts of the case and that it will continue to treat US LLCs in the same manner as before, this being broadly summarised as follows:
- Where US LLCs have been treated as companies within a group structure, HMRC will carry on treating them as companies for UK tax purposes.
- Where a US LLC itself has 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 will continue with its historical approach in terms of deciding whether a US LLC is to be regarded as having issued share capital for UK tax purposes. In other words they will look at various facts and circumstances in analysing the position, such as the share capital, who carries on the business, and who owns its profits, debts and assets.
HMRC also states in its response, rather forebodingly, that “Individuals claiming double tax relief and relying on the Anson v HMRC decision will be considered on a case by case basis”.
Care should be taken by both individuals and corporate entities when operating via US LLCs to ensure all the UK tax implications are understood and planned for. LLCs can also exist in countries other than the US and we would expect HMRC to take the same view as summarised in its response to this case in determining their UK tax status.
If you are considering operating via a foreign LLC or you already doing so please contact us for a review of the UK tax implications.
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.
See also…
US LLCs: change in UK Tax Treatment
UK Tax Residents – Beware of US LLCs!
International Business Strategies
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