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UK OK’s Tax Credit for US LLC Shares

On July 1, 2015, the Supreme Court of the United Kingdom held that a British citizens’ share of the profits in a Delaware limited liability company (LLC) qualified for a UK tax credit under a tax treaty between the two nations.1 The court held this position because, based on Delaare law and the LLC agreement, the profits taxed in the UK were the same as those taxed in the US. With this decision, the taxpayer was granted relief from double taxation.

The ruling is something of a surprise. British revenue and customs authorities have long held that, for tax purposes, a US LLC’s profits should be treated as taxable at the entity level and not to its members. The ruling may have a considerable impact on planning for future UK/US cross-border structures. Traditionally, LLCs have been avoided in favor of more cumbersome formations such as limited liability partnerships.

1 Anson v. HM Revenue & Customs (2015 UKSC 44)

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