On 20 May 2010, HM Revenue and Customs (HMRC) made an announcement on its treatment of US LLCs. The announcement confirms that HMRC will be appealing the recent decision in Swift v HMRC, in which the UKs First-Tier Tribunal (the Tribunal) had decided that a UK resident individual (Mr Swift) was entitled to double taxation relief (DTR) by way of a UK tax credit for US tax he had paid on his share of profits from a Delaware limited liability company (LLC) in which Mr Swift was a member. This decision went against the commonly held view that LLCs are considered to be opaque taxable entities for UK tax purposes, a view which had been enshrined in HMRCs guidance. The announcement confirmed that pending the outcome of its appeal HMRC will continue its current general practices in relation to US LLCs.
This client alert discusses the impact of this announcement as well as the original decision in Swift v HMRC, and certain other recent case law related to the tax treatment of US LLCs.