moving to UK but shareholder in US company

Hi all,

My wife and I are soon relocating to the UK from the US. My wife is a Colombian national but is a shareholder in a US LLC, which she plans to retain once in the UK. On the UK end, are there any headline tax issues we need to be aware of with regards to potentially drawing an income or a share of the profits from the US LLC? We've plenty of research to do, but any initial guidance would be much appreciated.

Thanks very much.

The following are the two main aspects to start to consider.

For UK tax purposes, a US LLC is tax opaque. Distributions from the LLC are taxed as dividends, with no credit for underlying US tax. This can be hugely disadvantageous compared with the taxation of tax transparent vehicles, such as LLPs.

Your wife is likely not to be UK domiciled. This means that she could claim to use the remittance basis for non UK source income such as the LLC distributions. She would be taxed in the UK only to the extent that she brought the distributions to the UK.

As with all tax matters, there are more detailed aspects, but the above should get you started.

I would expect the LLC to become a UK resident company (by virtue of management & control) and taxable by the UK on worldwide profits. The remittance basis would not in such a case be relevant. A US domestic LLC is an unconventional entity choice for a UK resident.

Guya makes excellent points about the management and control of the LLC. The position would depend on the other relevant parties. It might be that the management and control remains outside the UK.

Thanks to you both for the quick replies. I realise I'm opening a can of worms beyond my current understanding!

Two quick questions based on your comments though:
1) Dunedin: you say that "your wife is not likely to be UK domiciled". If she's resident in the UK, is she not domiciled? Or are there different meanings for tax purposes?

2) If the company is a LLP, does that mean she is taxed 'normally' on any income, rather than as dividends if it is a LLC, even if management and control is outside of the UK?

Thanks again,
Simon

Broadly, the domicile of an individual is the country that would be considered to the individual’s long term home. It is an international private law concept, but used in the UK’s tax system. By contrast, residence relates to the country or countries in which an individual lives in the short term.

The UK tax system grants tax privileges to UK residents who are not UK domiciled. The tax privileges of non-doms have been reduced in recent years. However, for non-doms who have not been resident for many years, the individual may claim to pay tax on non UK investments only to the extent that the income or gains are brought into the UK.

In both the US and the UK, an LLP is considered to be tax transparent. A UK resident individual would be taxed on  his or her share of the underlying profits of the LLP, with credit for US tax.