How a US LLC is taxed for UK residents

HMRC generally treats a US limited liability company (LLC) as opaque: the profits belong to the LLC first, so a UK resident member is taxed only on what the LLC distributes, as dividend income. The Supreme Court in Anson v HMRC [2015] UKSC 44 allowed one member double tax relief on his share of LLC profits, but that turned on findings of fact about Delaware law that HMRC says do not bind later cases. Where the LLC is transparent for US tax, a UK member can pay US tax on the profits and UK tax on the distributions with no credit for the US tax.

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Why do the US and the UK see the same LLC differently?

For US federal tax an LLC is often treated as a partnership or, with a single member, disregarded, so the members pay US tax on their share of the profits each year. An LLC can also elect to be taxed as a corporation. None of that decides the UK position. HMRC’s International Manual says that how a foreign entity is taxed in another country is not relevant to the UK analysis (INTM180040). The question is what profits, income or gains the UK member is liable to UK tax on, applying UK tax law to the member’s rights under the foreign commercial law and the LLC agreement.

HMRC uses two informal labels. An entity is “transparent” if its members are generally taxed on its profits as they arise, and “opaque” if they are generally taxed only on distributions (INTM180010). To reach a general view HMRC looks at six factors in INTM180020, including whether the entity has a legal existence separate from its members, whether it carries on the business itself, whether members share in profits as they arise or only after a distribution is decided, and who owns the assets and owes the debts. HMRC’s list of foreign entity classifications at INTM180030 shows the US LLC as opaque, a view it has held since June 1997.

What did the Anson case actually decide?

Mr Anson was UK resident but not UK domiciled and was a member of a Delaware LLC that carried on a trade. The LLC was a partnership for US tax, so he paid US federal and state tax on his share of the profits. He claimed double taxation relief in the UK under the UK/US treaty and the unilateral relief rules. The issue was whether his UK liability arose on the same income that had suffered US tax: his share of the profits as they arose, or only distributions.

The First tier Tribunal found as a fact that the profits did not belong to the LLC in the first instance and that the members had an interest in the profits as they arose. On that finding the Supreme Court held that his income arising in the US was his share of the profits, so he was taxed on the same income in both countries and was entitled to relief. Crucially, the Supreme Court treated the tribunal’s view of Delaware law as a finding of fact on foreign law, which is not binding in later cases (INTM180050).

The case also settled the method for testing whether income is “the same”. INTM161040 sets out three steps taken from the judgment: identify the profits by reference to which the UK tax is computed (a UK law question), identify the profits by reference to which the foreign tax is computed (a foreign law question), and compare them. HMRC accepts some pragmatism where accounting rules differ, but not treating profits and distributions of profits as the same income.

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What is HMRC’s view after Anson?

HMRC published Revenue and Customs Brief 15 (2015) saying the decision was specific to its facts and that claims by individuals for double taxation relief would be considered case by case (DT19853, INTM180050). Its current guidance goes further. Based on its understanding of Delaware LLC law as at 6 December 2023, HMRC believes the profits of an LLC generally belong to the LLC in the first instance, so members are not “receiving or entitled to the profits” for section 8 of the Income Tax (Trading and Other Income) Act 2005. The reasons it gives include that the LLC carries on the business, is a separate legal entity, owns the business assets, is responsible for its own debts, and that a member only becomes a creditor once entitled to a distribution.

HMRC also rejects the tribunal’s reliance on capital accounts, saying a capital account is an equity concept and gives no right to a distribution. It says the LLC laws of other US states are substantially the same as Delaware’s, and that whether the LLC is a partnership, disregarded or a corporation for US tax makes no difference to the UK analysis (INTM180050).

How is a UK resident individual member taxed?

On HMRC’s view an individual member is liable to UK tax only on dividends or other distributions from the LLC. They are taxed at the dividend rates and can use the dividend allowance (INTM180050). Distributions are foreign income, reported on the Foreign pages of the Self Assessment return and converted into pounds at the exchange rate when the income arose (SA106 notes). Before 6 April 2025 a non domiciled resident like Mr Anson could use the remittance basis; that has been replaced, and a newly arrived resident should instead check whether Foreign Income and Gains relief applies. See the foreign income and gains regime and declaring foreign income.

Can you get credit for the US tax?

It depends on how the LLC is treated in the US.

LLC is a partnership or disregarded for US tax. The member pays US tax on the profits but the UK taxes only distributions. HMRC’s position is that this is not the same income, so no double taxation relief is due, and no deduction is available under section 112 of the Taxation (International and Other Provisions) Act 2010 for that US tax either (INTM180050).
LLC is taxed as a corporation in the US. An individual member can claim credit for US tax charged on the distributions, limited to what the US may tax under Article 10 of the UK/US treaty, or a deduction under section 112 instead (INTM180050).
Underlying tax. US tax paid on the LLC’s profits is treated by the UK as underlying tax. Credit for it is available only to a UK company that controls at least 10% of the voting power of the LLC (Article 24(4)(b), DT19853). It is not available to an individual.

Illustration only. A UK resident individual owns a single member LLC that is disregarded for US tax. The LLC makes $100,000 profit and the member pays $25,000 of US tax on it personally. The LLC then distributes $75,000. On HMRC’s view the UK charge is on the $75,000 distribution, translated into pounds, at dividend rates. No credit is given for the $25,000 because the US taxed the profit and the UK taxes the distribution. The combined burden is higher than if either country alone taxed the income, which is why structures are worth reviewing before the LLC is formed. For the general mechanics see foreign tax credit relief.

What if a UK company is the member?

HMRC does not regard a corporate member as liable to UK tax on the LLC’s profits, because the profits are “of” the LLC for section 2 of the Corporation Tax Act 2009. A UK company receiving distributions may qualify for the distribution exemption. But if the UK company is small and the LLC is a partnership or disregarded for US tax, the exemption may not be available because the LLC would not be a US resident for section 931B. In that case the company may claim credit for US tax withheld on the distribution and, where Article 24(4)(b) is met, for underlying tax (INTM180050, DT19853). See double tax relief for companies.

Could the LLC itself be UK resident?

A company not incorporated in the UK is UK resident if its central management and control is exercised here. That is the case law test from De Beers Consolidated Mines v Howe, and it looks at where the highest level of control is actually exercised, which can be by an individual shareholder rather than the formal board (INTM120060). A UK resident individual who runs a single member LLC entirely from the UK should consider this risk. A UK resident company is chargeable to corporation tax on all its profits wherever arising (section 5 Corporation Tax Act 2009), subject to any treaty tie breaker, which adds a further layer to the analysis above.

What mistakes cause problems, and how do you get certainty?

Assuming the US classification carries over to the UK. It does not; the UK analysis is separate.
Claiming credit for US tax on LLC profits on the strength of Anson. HMRC says that where an individual has claimed relief for US tax on LLC profits, or has self assessed on the basis that the profits belong to the members, it will consider opening an enquiry or making a discovery assessment (INTM180050).
Ignoring US citizenship issues. A US citizen living in the UK faces a further layer of rules; see UK tax for US citizens.

Where the facts differ from the normal Delaware pattern, HMRC will give its view on whether a specific entity is transparent or opaque under its non statutory clearance service. The application goes to HMRC’s Base Protection Policy Team and should include the entity’s governing documents and an analysis of the six INTM180020 factors (INTM180060).

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.