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

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

The Delaware LLC, SPLLC, is transparent for US tax purposes and, based on its operating agreement and Delaware law, members are entitled to profits as they arise. Therefore, 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. If this is incorrect, s 739 Taxes Act 1988 would apply, still entitling the appellant to relief. If both are wrong, HMRC's discovery assessments would be valid.

Citation
[2010] UKFTT 88 (TC)
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/corporation Tax Appeal / First Tier Tribunal (tax), Judgment on Appeal Against Discovery Assessments and Closure Notices
Outcome
Appeal allowed
Legal Topics
Double Taxation Relief, Foreign Entity Classification, Discovery Assessments, Tax Treaty Interpretation
Tax Law International Taxation Double Taxation Relief Foreign Entity Classification Discovery Assessments Tax Treaty Interpretation

Case Brief

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Parties

Mr Swift

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax/corporation Tax Appeal / First Tier Tribunal (tax), Judgment on Appeal Against Discovery Assessments and Closure Notices

Legal Issues

  1. 1 Whether the appellant is entitled to double taxation relief for US tax paid on profits from a Delaware LLC
  2. 2 Whether the Delaware LLC is transparent or opaque for UK tax purposes
  3. 3 Whether discovery assessments issued by HMRC are valid

Ratio Decidendi

The Delaware LLC, SPLLC, is transparent for US tax purposes and, based on its operating agreement and Delaware law, members are entitled to profits as they arise. Therefore, 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. If this is incorrect, s 739 Taxes Act 1988 would apply, still entitling the appellant to relief. If both are wrong, HMRC's discovery assessments would be valid.

Court Disposition

Appeal allowed

Orders

  • The appellant is entitled to credit for US tax paid on his share of profits from the Delaware LLC.
  • Discovery assessments and amendments to self-assessment returns are set aside to the extent inconsistent with this decision.