US Subsidiary

A 2020 Member would like some general advice with the following:

"We have a UK group of companies with a US subsidiary LLC.

The LLC makes significant losses which are not currently available to be offset against the UK group.
The way that the LLC is managed has changed significantly and we are exploring whether it is now the case that the LLC is managed and controlled in the UK.

Under the UK double taxation agreement with the US  the tie break residency rules would side with the UK being the contracting state where the LLC should be taxed.

The procedure appears to be that we complete a self assessment tax return for the LLC and claim the losses against UK group companies under the group relief provisions.

At the same time we need to provide HMRC with the evidence to support the fact that the LLC has migrated to the UK. Does anyone have any experience of HMRC agreeing that a foreign loss making entity has migrated to the UK as clearly if agreed there will be a net outflow of tax from HMRC.

On the assumption that HMRC agree it is now a UK resident company it is my understanding that they then enter dialogue with the IRS to claim residency.

Can anyone please advise on the procedure and questions the IRS would ask to satisfy them of the position?

It seems possible that if the IRS does not agree then we need to appeal to the tax authorities under Article 25 Non Discrimination article to request fair play between the tax authorities.

In addition presumably there are US tax rules which may impose a tax charge on a migrating company. Can anyone explain what these are? Is the fact that the US company is loss making reduce or eliminate any possible tax charge? Are there any other taxation issues?

We are looking for clear practical advice on the above and the likely timescale for achieving a successful outcome.

If necessary we will be looking for a firm in the US to assist with the US questions etc .We would also require details of likely costs."

If anyone is able to help with this, please email Cathy at 2020.