HMRC has issued its response to the Supreme Court decision in George Anson v HMRC (2015) UKSC 44, confirming that it will continue with its existing practice to treat US LLCs as companies (see Revenue and Customs Brief 2015/15).
In Anson v HMRC (reported in Tax Journal, 11 July 2015), the Supreme Court found that a member of a US limited liability company (LLC) was eligible for double tax relief in the UK on his share of the profits. Writing in Tax Journal (11 July 2015), Charles Yorke (partner at Allen & Overy) explained why the decision was keenly anticipated: ‘It was never just about claiming double tax relief for investments in Delaware LLCs, but goes to the heart of entity classification. A general concern had been that the Court of Appeal's requirement for a proprietary interest in the entity's assets was too onerous for transparency. The decision went the other way, however, and Mr Anson won. Good news for Mr Anson, but we are left with a somewhat confusing test, likely to result in the need to reconsider the classification of many non-UK entities.’
In the brief, HMRC said that:
where US LLCs have been treated as companies within a group structure, HMRC will continue to treat the US LLCs as companies; and
where a US LLC has itself 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’s approach is on the basis that Anson was specific to the facts and findings determined by the First-Tier Tribunal (FTT) on the interpretation of foreign law and the relevant LLC agreement and need not be applied more generally. Accordingly, HMRC will consider individuals claiming double tax relief and relying on the Anson decision on a case by case basis.
Commenting on HMRC’s brief, Charles Yorke said: ‘This is a sensible way to deal with the potential fallout from the Anson case – no one wanted the historic position of group LLCs to be reopened. Nothing suggests that HMRC won’t apply the full reasoning of the Supreme Court to LLCs established after the decision, so care will still be required going forward. It is disappointing that there is no guidance on this aspect.’
Rupert Shiers and Philip Harle (Hogan Lovells) said ‘it is striking that having litigated to the Supreme Court and lost, HMRC feels able to marginalise the Supreme Court’s decision in this way’. They added, however, that: ‘Beneath the surface there are real difficulties for international tax systems dealing with hybrid entities (and the US “check the box” concept in particular), and HMRC’s approach is probably the best one for mitigating disruption to businesses arising from this case.’
HMRC has issued its response to the Supreme Court decision in George Anson v HMRC (2015) UKSC 44, confirming that it will continue with its existing practice to treat US LLCs as companies (see Revenue and Customs Brief 2015/15).
In Anson v HMRC (reported in Tax Journal, 11 July 2015), the Supreme Court found that a member of a US limited liability company (LLC) was eligible for double tax relief in the UK on his share of the profits. Writing in Tax Journal (11 July 2015), Charles Yorke (partner at Allen & Overy) explained why the decision was keenly anticipated: ‘It was never just about claiming double tax relief for investments in Delaware LLCs, but goes to the heart of entity classification. A general concern had been that the Court of Appeal's requirement for a proprietary interest in the entity's assets was too onerous for transparency. The decision went the other way, however, and Mr Anson won. Good news for Mr Anson, but we are left with a somewhat confusing test, likely to result in the need to reconsider the classification of many non-UK entities.’
In the brief, HMRC said that:
where US LLCs have been treated as companies within a group structure, HMRC will continue to treat the US LLCs as companies; and
where a US LLC has itself 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’s approach is on the basis that Anson was specific to the facts and findings determined by the First-Tier Tribunal (FTT) on the interpretation of foreign law and the relevant LLC agreement and need not be applied more generally. Accordingly, HMRC will consider individuals claiming double tax relief and relying on the Anson decision on a case by case basis.
Commenting on HMRC’s brief, Charles Yorke said: ‘This is a sensible way to deal with the potential fallout from the Anson case – no one wanted the historic position of group LLCs to be reopened. Nothing suggests that HMRC won’t apply the full reasoning of the Supreme Court to LLCs established after the decision, so care will still be required going forward. It is disappointing that there is no guidance on this aspect.’
Rupert Shiers and Philip Harle (Hogan Lovells) said ‘it is striking that having litigated to the Supreme Court and lost, HMRC feels able to marginalise the Supreme Court’s decision in this way’. They added, however, that: ‘Beneath the surface there are real difficulties for international tax systems dealing with hybrid entities (and the US “check the box” concept in particular), and HMRC’s approach is probably the best one for mitigating disruption to businesses arising from this case.’
