Consultation on tax treatment for UK resident members of reverse hybrids

This consultation examines the tax position of UK resident individuals who are members of reverse hybrid entities, including US Limited Liability Companies (LLCs). It addresses concerns regarding unintentionally high effective tax rates caused by mismatches in entity classification between the UK and other jurisdictions, which can lead to double taxation. The government is currently proposing potential solutions and is inviting feedback from relevant stakeholders.

What it means for a practice

• Practices with clients who are members of foreign entities should review if their clients are affected by these classification mismatches.
• The proposals may impact how tax liabilities are calculated for clients receiving income from US LLCs or similar reverse hybrid structures.
• Practitioners may wish to review the consultation details to determine if they should provide feedback on behalf of affected clients.