Foreign entities may be classified as ‘opaque’ or ‘transparent’ for UK tax purposes, which is determined following case law (and HMRC guidance). Subject to anti-avoidance provisions, the profits of opaque entities will not be taxed in the UK until distributed, whereas the profits of transparent entities will be taxed as they arise. Distributions from opaque entities may be classified as income or capital for UK tax purposes. Tax planning opportunities may arise with hybrid entities, again subject to anti-avoidance rules.
