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Two US development

Two recent developments may be of interest to clients with US connections.

The first relates to clients of US domicile. In some circumstances (very broadly, once you have been UK-tax resident for seven years) the valuable benefit of the "remittance basis" of taxation of non-UK income and gains is available in respect of a tax year only if a "remittance basis charge" (currently £30,000) has been paid for the year. Until now, global tax planning for US citizens resident in the UK has been made difficult by uncertainty as to whether the IRS will give relief against US taxes for the remittance basis charge. Happily, the IRS have recently issued a ruling confirming that the charge is creditable. We will be taking this into account in tax planning for all our affected clients: if you would like to discuss further how it affects you please contact us or and/or your US tax adviser.

Every silver lining has its cloud: remember that it is proposed that the remittance basis charge will rise to £50,000 from next April for (very broadly) people who have been fortunate enough to have been resident in the UK for 12 years. There are still a few days to respond to the consultation document issued in May which covers this and other proposed changes to the taxation of non-domiciliaries.

The second (unrelated) development concerns the treatment for UK tax purposes of a US LLC. A ruling last year held that an LLC should be treated as "transparent" for UK tax purposes, reversing long-established practice and throwing planning into confusion. That ruling has now been reversed on appeal, restoring the historical treatment as an "opaque" structure for UK tax purposes. Hence UK tax is charged only on amounts distributed (good) but US tax paid on LLC profits is not creditable against a member's personal UK tax (bad). For further advice on this and other transborder matters please contact us.

For more on this please contact help@bkltax.co.uk or call us on 0208 922 9222.