HMRC has launched a consultation (10 June 2026) on the taxation of UK‑resident individuals who invest through US LLCs and other “reverse hybrid” entities.
The issue arises from a fundamental mismatch in how jurisdictions classify entities. In the US, LLCs are typically treated as tax transparent, meaning individuals are taxed on their share of profits as they arise. In contrast, the UK generally treats LLCs as opaque, taxing individuals only when distributions are received. When this was successfully challenged in the Anson case in Supreme Court in 2015, allowing individuals to claim double tax relief in the UK, HMRC responded by updating their guidance to indicate that this was ‘not binding in subsequent cases’, leaving taxpayers in a very difficult position.
This mismatch creates a significant problem: double taxation without effective relief. US tax is charged on underlying profits, while UK tax is charged on distributions. Because these are not the “same profits” for treaty purposes, double tax relief is often denied. As a result, UK‑resident members can face effective tax rates exceeding 60%–75%, a clearly unintended and commercially distortive outcome.
The consultation recognises this as a barrier to the UK’s competitiveness, particularly for internationally mobile individuals and private capital participants. It seeks views on potential legislative solutions to align the tax treatment and reduce excessive tax leakage, while avoiding disruption to corporate investors.
This is a significant development. Many structures involving US funds, carried interest vehicles and investment platforms rely on LLCs, and the current uncertainty—particularly post‑Anson—has made outcomes difficult to predict and defend.
How TAP can assist
TAP is well placed to support affected individuals and will also be responding to the consultation with a technical submission which is based on actual client outcomes.
We can:
- Assess existing LLC and hybrid structures for exposure to double taxation
- Model current vs proposed outcomes and identify planning opportunities
- Advise on restructuring (e.g. entity choice, holding vehicles, or jurisdictional planning)
👉 If you would like our advice and support please do not hesitate to contact us using the form at the bottom of this page.
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