Swift v Revenue & Customs [2010] UKFTT 88 (TC) (22 February 2010)

Swift v Revenue & Customs [2010] UKFTT 88 (TC) (22 February 2010)

The Tribunal found that under the Delaware LLC Operating Agreement and Delaware law, profits of SPLLC are allocated to members as they arise, making the entity transparent for US tax purposes. The Appellant is entitled to double taxation relief for US tax paid on his share of profits, as UK tax is computed by reference to the same profits or income. If this is incorrect, s 739 Taxes Act 1988 would apply, treating the LLC as not transparent, but the Appellant would still be entitled to relief. If both are incorrect, HMRC's discovery assessments would be valid.

Citation
[2010] UKFTT 88
Parties
Appellant: Mr Swift; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
22 February 2010
Procedural Posture
Income Tax Appeal / Final Judgment on Appeal Against Discovery Assessments and Closure Notices
Outcome
Appeal allowed
Legal Topics
Double Taxation Relief, Entity Classification, Foreign Income, Discovery Assessments
Tax Law International Taxation Double Taxation Relief Entity Classification Foreign Income Discovery Assessments

Case Brief

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Parties

Mr Swift

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / Final Judgment on Appeal Against Discovery Assessments and Closure Notices

Legal Issues

  1. 1 Is the Appellant entitled to double taxation relief for US tax paid on profits from a Delaware LLC?
  2. 2 Is the Delaware LLC transparent or opaque for UK tax purposes?
  3. 3 Are HMRC's discovery assessments valid?

Ratio Decidendi

The Tribunal found that under the Delaware LLC Operating Agreement and Delaware law, profits of SPLLC are allocated to members as they arise, making the entity transparent for US tax purposes. The Appellant is entitled to double taxation relief for US tax paid on his share of profits, as UK tax is computed by reference to the same profits or income. If this is incorrect, s 739 Taxes Act 1988 would apply, treating the LLC as not transparent, but the Appellant would still be entitled to relief. If both are incorrect, HMRC's discovery assessments would be valid.

Court Disposition

Appeal allowed

Orders

  • Appellant is entitled to credit for US tax paid on his share of SPLLC profits.
  • Discovery assessments and closure notices are set aside.