This case concerns the appropriate tax treatment of a US Limited Liability Company (“US LLC”) for the purposes of the double tax treaty between the US and the UK (the “US/UK DTT”).

It is particularly important for UK resident individuals who have invested in a US LLC, as it concerns whether such individuals can benefit from double tax relief under the US/UK DTT in relation to US tax on the profits of the US LLC.


Mr Anson was a member of HarbourVest Partners LLC (“the LLC”), a business established under the Delaware LLC Act and under the terms of a limited liability company agreement (“LLC Agreement”) governed by the law of Delaware, classified as a partnership and consequently transparent for US tax purposes. Mr Anson (a UK resident but non-domiciled for UK tax purposes) received his share of the profits in accordance with the LLC Agreement, paid US tax on his share of the profits at the rate of 45%, and remitted the balance to the UK.

The question was whether Mr Anson could claim double tax relief under the US/UK DTT in relation to this US tax, and effectively use it as a credit against his UK income tax liability (at a rate of 40%) on his share of the profits.

The Court of Appeal decision

The First Tier Tribunal (had decided in Mr Anson’s favour on the basis that, following expert witness evidence, the combined effect of the Delaware LLC Act and the LLC Agreement ensured the profits belonged to the members as they arose, and this was decisive because the UK/US DTT allowed for double tax relief where the UK sought to tax the same profits as had already been taxed in the US.

The Upper Tribunal, in a decision affirmed by the Court of Appeal, overturned the decision of the FTT.

The Court of Appeal considered that the profits distributed to Mr Anson from the LLC did not have the same source as the profits earned by the LLC. In particular, the Court applied its earlier decision in Memec plc v Commissioners of Inland Revenue [1998] STC 754, and determined that the decisive factor was that the LLC was the legal owner of the LLC’s assets, which generated the profit on which the LLC was subject to tax.

The profits of the LLC therefore came from a different source to the source of Mr Anson’s profits, which arose from his interest in the LLC, and therefore double tax relief was not available.

Supreme Court

The Supreme Court overturned the Court of Appeal’s decision finding in favour of Mr Anson. The Court decided that Court of Appeal failed to properly address the only relevant question in the case, namely, whether the income taxed in one country is the same as the income taxed in the other.

The FTT had determined, based on the available expert evidence that Mr Anson was entitled to share in the profits of the LLC as they arose. The Supreme Court held that this was determinative of the appeal, as it meant that he was taxed on the same profits as the profits that had already been subject to US tax. Therefore, double tax relief was available.


The wider impact of this decision is subject to debate. HMRC considers that it is very much limited to its facts, and each US LLC will need to be carefully considered, in light of the available expert evidence, as to whether it can be said that the individual members of the LLC are entitled to a share of the profits of the LLC as those profits arise.

UK taxpayers (both individuals and corporates) will need to carefully evaluate the tax treatment of distributions they receive from US LLC’s in light of this decision.