UK Supreme Court Decision on Tax ‘Transparency’ of a Delaware LLC

On July 1, the Supreme Court of England and Wales handed down its long awaited judgment in Anson v. HM Revenue & Customs (2015 UKSC 44).

In allowing a UK taxpayer’s claim to double tax relief for US taxes incurred on profits earned by a Delaware LLC of which he was a member, the Supreme Court found that the profits of the LLC belonged directly to the members. The members would therefore be taxable in the UK on their allocable share of the profits as they arose, rather than when distributed.

This decision conflicts with the long-standing view of the UK tax authorities (and adopted by many UK taxpayers) that US LLCs should generally be regarded as ‘opaque’ for UK tax purposes. As such, it is potentially very significant for UK investors in US LLCs and for funds that are LLCs or make investments through LLCs.