US LLCs – claiming double tax relief for US tax paid by a LLC – the Anson case

A UK taxpayer (George Anson) received a distribution from a Delaware limited liability company (LLC). Mr Anson had paid US Federal and State tax on his share of the LLC profits as they arose and he claimed relief for this US tax paid against his UK income tax liability.

The Upper Tribunal refused the claim, holding that the LLCwas a person in its own right (it was not tax transparent) and that his shareof the income in the LLC was not Mr Anson’s as it arose. The Upper Tribunal’s decision denying doubletax relief (‘DTR’) was then upheld by the Court of Appeal earlier this year (link to CAjudgement). Thus, the present state oflaw is that a UK individual does not have entitlement to claim relief for UStax paid on the LLC profit against his UK income tax liability on thedistribution from the LLC.

The Supreme Court has recently given permission for Mr Ansonto appeal, the CA having refused permission to appeal. Where a court or tribunal decision has beenupheld on a review by a superior court for the SC to give permission for thematter to come to the SC it has to be convinced there is an arguable point oflaw of general public importance. 

To keep open the possibility of a claim for DTRby taxpayers in similar circumstances the tax return should include a “whitespace” disclosure reserving the right to amend the return in the event that theSupreme Court reverses the Court if Appeal’s decision.

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