• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/22/2013

United Kingdom - Taxation of Delaware LLC distributions to individual 

November 22: The UK Supreme Court has granted leave for an appeal in a case concerning whether an individual taxpayer is subject to UK tax on distributions from a Delaware LLC. Anson v. HM Revenue & Customs Commissioners

Is LLC transparent for UK tax purposes?

The taxpayer argued that the LLC was transparent so that he was to be taxed in the UK on its profits as they arose (with a credit for the amount of U.S. tax paid on those profits), and not to be taxed on distributions made by the LLC. In order to obtain double tax relief in this way, Article 23 of the United Kingdom-United States income tax treaty requires the taxpayer to establish that the LLC was transparent so that his income from the LLC was the same profit as that, by reference to which, he was taxed on in the United States.

The First Tier Tribunal (FTT) considered that the arrangements for automatically allocating profits to members meant that the profits of the LLC had belonged to the taxpayer throughout (i.e., that the LLC was transparent for UK tax purposes).

The Upper Tribunal and the Court of Appeal considered that the FTT had applied the wrong test, and held that the profits belonged to the LLC, confirming the HMRC long-standing practice of treating LLCs as corporate vehicles. Therefore, the taxpayer was not entitled to credit relief for the U.S. tax paid on the LLC’s profits.

The Supreme Court has not yet established a date for its hearing of the case.

Read a November 2013 report [PDF 800 KB] prepared by the KPMG member firm in the United Kingdom: Weekly Tax Matters (22 November 2013)

Also included in the report are the following topics:

  • Proposed changes to the OECD Model Tax Convention
  • CRD4: Country-by-country reporting
  • Italian government makes €1 billion available for VAT refunds
  • BAA - Supreme Court confirms permission to appeal was refused
  • Low level of day-to-day control does not preclude an employment relationship
  • Changes to rules for entertainers’ national insurance contributions from 6 April 2014
  • RTI – updated guidance regarding the business tax dashboard

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