Why the mismatch makes a US LLC expensive
The US looks through an LLC and taxes the member on profits as they arise. HMRC takes the opposite view: it generally classifies a US LLC as opaque and taxes a UK-resident member only on distributions, as foreign dividends at up to 39.35% in 2026/27. The UK is taxing a different event, at a different time, in a different character, so foreign tax credit relief often cannot bridge the gap. The full mechanics, including HMRC's stylised example of a rate above 75%, are in our guide to UK tax on a US LLC.
The common traps
Two mistakes recur. First, relying on Anson: the Supreme Court allowed one member treaty relief on his specific facts about Delaware law, but HMRC's guidance (INTM180050) says LLC profits generally belong to the LLC first, so Anson-style credit claims invite an HMRC enquiry. Second, running the LLC from the UK: if it is centrally managed and controlled here, HMRC can treat the LLC itself as UK tax resident and charge corporation tax, or find a UK permanent establishment.
What to do instead
The aim is to make both countries agree on the entity's character. A US check-the-box election on Form 8832 can align both sides on opaque treatment so relief works, at the cost of US corporate tax; a US LP or LLP, or a UK company, may fit a UK resident better. Watch the reform too: HMRC's consultation (10 June to 31 July 2026) proposes letting UK-resident individual members treat eligible reverse hybrids as transparent for income tax and CGT, but it is not yet law and covers individuals only. US federal and state filings are handled by our US partners (Enrolled Agents and CPAs), whom we coordinate for you; the wider picture is in our US-UK tax guide.