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American Cousins: HMRC Revisits Anson

On 12 December 2023, H.M. Revenue & Customs (“HMRC”) updated its guidance on foreign entity classification and, specifically, HMRC’s treatment of profits of, and distributions by, United States-established limited liability companies (“LLCs”).  The revised HMRC guidance relates back to the important decision in July 2015 of the UK Supreme Court in Anson v HMRC [2015] UKSC 44 (“Anson”). 

Background to the revised guidance

As a brief recap, the issue before the UK courts in Anson was whether, under UK law, Mr Anson, a UK resident (but non-UK domiciled) individual, was liable to pay UK tax as a member of a Delaware LLC on the same profits that he had already paid US taxes on.  And, if so, whether Mr Anson could claim tax relief under the UK-US double taxation convention (the “Convention”).  These issues were eventually considered by the Supreme Court, with the answers being traced back to questions of Delaware law and interpretation of the relevant LLC agreement which had been explored by the lower tribunals and courts during the lengthy litigation.

The First-tier Tribunal heard conflicting expert evidence on the provisions of the relevant LLC agreement and Delaware law.  The key point to be determined was whether the profits of the LLC arose directly to each of the members of the LLC.  Under s18-503 of the Delaware LLC Act, the First-tier Tribunal concluded that the LLC members had an interest in the profits of the LLC as they arose.  In turn, double taxation relief under the Convention was allowed on the profit arising to Mr Anson. The Supreme Court agreed with the conclusions of the First-tier Tribunal. 

HMRC’s changing perspectives

Following the decision in Anson, HMRC published Revenue & Customs Brief 15[1] which confirmed that the application of the Anson decision would need to be considered by HMRC inspectors on a case-by-case basis.  The Revenue and Customs Brief was finely balanced: it provided taxpayers with a route to claiming double taxation relief, while also preserving the right of an LLC to claim UK corporation tax group relief in some situations (effectively allowing the LLC in question to continue to be treated generally as being opaque for certain UK tax purposes).

On 12 December 2024, HMRC published further guidance (in the HMRC International Manual at paragraph INTM180050) on the issues raised in Anson. Contrary to First-tier Tribunal’s conclusion relating to the competing Delaware law advice presented in the tribunal hearing, HMRC have stated that the profits of an LLC will generally belong to the LLC in the first instance and that members will generally not be treated as “receiving or entitled to the profits” of an LLC as they arise. HMRC’s argument is that an LLC is a separate legal entity distinct from its members.  An LLC will usually own the assets which are used in its business. The LLC will be responsible for debts, obligations and liabilities of the LLC. Members of that LLC would achieve the status of a creditor to the LLC with regard to their respective economic interest in the LLC only when the members become entitled to a distribution. A member is entitled to receive an interim distribution only to the extent provided by the LLC agreement; moreover, a distribution may not be made if the LLC is insolvent or would make the LLC insolvent. Creditors of members have no rights to the property of the LLC. On a winding up of the LLC, assets have to be distributed to the creditors of the LLC ahead of the members.[2]

The revised guidance from HMRC suggests that, contrary to First-tier Tribunal’s view, an allocation of profits to a member’s capital account does not evidence a liability to the member.

Resurrecting uncertainty

At the core of HMRC’s revised guidance is the approach, followed by HMRC, that the profits of an LLC belong to the LLC and not to the LLC members as those profits arise. 

This would, however, be a restatement of the findings of the First-tier Tribunal in Anson if such an approach is correct. The First-tier Tribunal acknowledged in their judgment that “the assets representing those profits do belong to the LLC until the distribution is actually made but we do not consider that this means that the profits do not belong to the members” (emphasis added).[3]  It is unclear why HMRC’s revised guidance is revisiting what was a reasonably settled position under UK tax law, precedent and practice. 

Furthermore, HMRC’s revised guidance in December 2023 is lacking the more nuanced approach in its earlier guidance of looking at each LLC, and the LLC agreement governing the relationships with the members of that LLC, on a case-by-case basis. 

Indeed, the importance of the LLC agreement itself is relegated from the revised HMRC guidance.  Such a relegation is difficult to reconcile with the importance placed by the UK courts on the precise wording of the LLC agreement in Anson.

Practical lessons

Some complications follow from the revised guidance on LLCs and the Anson case:

  • If the revised guidance from HMRC is followed, individual members of LLC’s would not be treated as being in receipt of “the same profits, [or] income” for UK tax purposes as were taxed in the United States (in the context of Article 24 of the Convention, dealing with relief from double taxation). This could sterilise taxpayers’ claims for double tax relief, with significantly adverse consequences. 
  • Following HMRC’s revised guidance becomes difficult in the context of tax return preparation. Filing a tax return in accordance with the decision of the Supreme Court in Anson would now be taking a position directly contrary to HMRC’s revised guidance.  Instinctively, that feels somehow wrong - especially so given the prominence of the Anson decision by the Supreme Court, and the time which has elapsed since that decision was delivered in July 2015. 
  • The revised guidance from HMRC was always going to generate discussion and raise concerns. It would have been preferable for the revised guidance to have been introduced in a more visible form, perhaps as a Revenue & Customs Brief instead of suddenly appearing on HMRC’s website.  

Being eight years after the decision of the Supreme Court in Anson, the publication of HMRC’s further guidance in December 2023 is surprising.  There is a suggestion in the revised guidance that additional or revised Delaware law advice might have been obtained by HMRC.  But would such refreshed legal advice be so much stronger to justify the cost of near-predictable litigation in the future against a taxpayer following the approach of the Supreme Court in Anson?


[1] Revenue and Customs Brief 15 (2015): HMRC response to the Supreme Court decision in George Anson v HMRC (2015) UKSC 44 - GOV.UK (

[2] INTM180050 - Foreign entity classification for UK tax purposes: HMRC view of Delaware LLCs in light of Anson - HMRC internal manual - GOV.UK (

[3] First-tier Tribunal judgement (anonymised at the time as TC00399 Mr Swift [2010] UKFTT 88 (TC, at paragraph 10).

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