US limited liability corporations: updated HMRC guidance

29 January 2024

On 12 December 2023, HMRC issued updated guidance on the treatment of profits arising within, and distributions from, US LLCs.

In a number of respects the updated guidance is unsatisfactory, coming in the midst of tax return preparation season, seeking to re-argue points that many will have considered settled by the Supreme Court’s decision in Anson v HMRC and raising the prospect of true double taxation as between the US and the UK.

The 12 December guidance now leaves taxpayers with three choices. The first is to file in accordance with the guidance, in which case the taxpayer’s position is unlikely to be challenged by HMRC but they will end up paying in many cases double tax and potentially at very high effective rates. The second is to seek to reserve the taxpayer’s position by filing in accordance with the 12 December guidance (so as to avoid penalties, if any), whilst attempting to retain an ability to amend their returns in the event that HMRC are wrong. The final approach is to file in accordance with the Anson decision and take a position contrary to the 12 December guidance.

In a recent Tax Journal article, Sebastian Prichard Jones and Andrew Crozier discuss the updated guidance and options for taxpayers.

Read the full article.