It is necessary to characterise overseas entities for UK tax purposes, as this will determine how they (and their members and potentially other persons connected with them) are taxed. Broadly speaking, an entity may be:

1. •

   transparent—which means, that it is treated like a partnership or certain types of trust for UK tax purposes (hence not a taxable person in its own right, at least from a direct tax perspective) and its profits are typically taxed on its UK-resident members as they arise and whether or not they are distributed

2. •

   opaque—which means, broadly, that it is treated like a company for UK tax purposes (hence a taxable person in its own right) and its profits are typically not taxed in the UK until distributed to its UK-resident members or where anti-avoidance rules attribute its undistributed profits to another person (eg under controlled foreign company rules, for which see: CFC rules—overview), or

3. •

   opaque for the purposes of taxing capital gains but transparent for the purposes of taxing income (a hybrid treatment which applies in particular