J1 Visa for the USA - Do i still pay UK tax?
Dec 3rd 2009, 1:43 pm
#1
Just Joined
Thread Starter
Joined: Dec 2009
Posts: 6
J1 Visa for the USA - Do i still pay UK tax?
Hi All,
This is my first post here - but this place has been a haven of advice for me over the past month or so. But now has come the time for me to ask a specific question.
I am a UCL employee (i work in academia) and will be a visiting scholar in the USA for about 2 years (i hear if it is under 2 years, i will be exempt from US income tax - bonus!)
I was hoping to find out whether it's possible to be exempt from UK income tax while i am in the USA? I hear from other academics that it is possible.
My belief is that this would work if my salary gets paid directly to my institution in the USA (MIT), and then i get paid by MIT instead - enjoying the benefit that i do not have to pay US taxes for 2 years.
Can anyone confirm any of this?? i have been reading double taxation treaties, irs exemptions, uk tax laws etc - but i'm starting to get out of my depth.
Many thanks!
Chris
This is my first post here - but this place has been a haven of advice for me over the past month or so. But now has come the time for me to ask a specific question.
I am a UCL employee (i work in academia) and will be a visiting scholar in the USA for about 2 years (i hear if it is under 2 years, i will be exempt from US income tax - bonus!)
I was hoping to find out whether it's possible to be exempt from UK income tax while i am in the USA? I hear from other academics that it is possible.
My belief is that this would work if my salary gets paid directly to my institution in the USA (MIT), and then i get paid by MIT instead - enjoying the benefit that i do not have to pay US taxes for 2 years.
Can anyone confirm any of this?? i have been reading double taxation treaties, irs exemptions, uk tax laws etc - but i'm starting to get out of my depth.
Many thanks!
Chris
Dec 3rd 2009, 5:09 pm
#2
Joined: Apr 2002
Posts: 35,082
Re: J1 Visa for the USA - Do i still pay UK tax?
Look up tax posts from user caleyjag, he did the same thing & has posted about it a lot.
Dec 3rd 2009, 6:28 pm
#3
Just Joined
Thread Starter
Joined: Dec 2009
Posts: 6
Re: J1 Visa for the USA - Do i still pay UK tax?
I have read through one thread - but i'm not sure it's the same scenario. For me, i am a UK resident and i was hoping to claim back my UK tax. I dont think he covered that bit.
Dec 3rd 2009, 6:36 pm
#4
Forum Regular
Joined: Nov 2003
Posts: 96
Re: J1 Visa for the USA - Do i still pay UK tax?
The tax treaty will allow you to not pay any tax on your US source income to the US and the UK will regard this as US source income that is not subject to tax. You will still need to pay tax in the UK on interest etc... from your UK bank account, but you will be in a very nice situation with regard to taxes.
I did this by the way
I did this by the way
Dec 3rd 2009, 7:54 pm
#5
BE Site Lead
Joined: Aug 2004
Location: MA, USA
Posts: 92,170
Re: J1 Visa for the USA - Do i still pay UK tax?
One thing worth doing if you try dodging the taxes, stick what you would pay in taxes in some sort of high interest account in case you decide to stay and have to back pay it and any penalties...
Also ask around MIT, loads of Brits teach there so someone is bound to have the answers you are after, that and the consulate is opposite the campus now, so I'm sure you could pop across the street and ask for advice there as well.
Also ask around MIT, loads of Brits teach there so someone is bound to have the answers you are after, that and the consulate is opposite the campus now, so I'm sure you could pop across the street and ask for advice there as well.
Dec 5th 2009, 2:01 pm
#6
Forum Regular
Joined: Sep 2005
Location: Andover, MA
Posts: 250
Re: J1 Visa for the USA - Do i still pay UK tax?
The question is whether HMRC would consider you "ordinarily resident" in the UK. If you're moving for work, and are away from the UK for a period that includes a complete tax year, then I believe HMRC can treat you as "non-resident and not ordinarily resident" which means you wouldn't be liable for UK tax on income earned in the US.
Dec 6th 2009, 2:01 pm
#7
Just Joined
Thread Starter
Joined: Dec 2009
Posts: 6
Re: J1 Visa for the USA - Do i still pay UK tax?
The tax treaty will allow you to not pay any tax on your US source income to the US and the UK will regard this as US source income that is not subject to tax. You will still need to pay tax in the UK on interest etc... from your UK bank account, but you will be in a very nice situation with regard to taxes.
I did this by the way
I did this by the way
I have been reading some guidelines from the HMRC. Basically, the situation is that i will be paid from a grant being administered by UCL in London. However, i will be living and working in the USA for a day shy of 2 years (so i do not need to pay US tax). I would officially be a Visiting Professor (although i'm 27 - and by no means actually a professor! but it's what i'm classed as for VISA purposes)
So, i believe the way to not pay UK taxes is to have the money sent to MIT and then be paid from MIT, as opposed to going through PAYE in the UK.
Is this correct??
Also - you mention you had done it any guidance on what you had done?
Oh - and as an aside - i do not believe in dodging tax as I do think taxes a re necessary - but i do not believe in paying tax to a country that i do not reside in. Just thought i'd put that caveat there in case anyone thinks i'm dodgy
Thanks in advance!
Dec 7th 2009, 10:02 pm
#8
Forum Regular
Joined: Nov 2003
Posts: 96
Re: J1 Visa for the USA - Do i still pay UK tax?
If you are paid through MIT then they will be working with IRS laws. You can use US-UK tax treaty article 20A to be exempt from US tax (and the Inland Revenue classify you as non-resident during this time so no tax on this money in the UK).
Check into making National Insurance contributions from abroad too (you should be exempt from Social Security if I remember correctly). You should be able to make very cheap NI contributions.
Cheers,
Sam
Check into making National Insurance contributions from abroad too (you should be exempt from Social Security if I remember correctly). You should be able to make very cheap NI contributions.
Cheers,
Sam
Dec 16th 2009, 10:42 am
#9
Just Joined
Thread Starter
Joined: Dec 2009
Posts: 6
Re: J1 Visa for the USA - Do i still pay UK tax?
Hi All,
It seems it is possible. This document from the HMRC outlines the rules and regulations for paying tax when abroad. It has some excellent flow charts which lay out the rules very clearly.
http://www.hmrc.gov.uk/cnr/hmrc6.pdf
We have applied to HMRC for a new tax code which we give to our employer - they will then exempt us from tax on the PAYE system. All good!
Below, i am quoting an email from an accountant who deals with these things in case it helps anyone in future.
Chris
It seems it is possible. This document from the HMRC outlines the rules and regulations for paying tax when abroad. It has some excellent flow charts which lay out the rules very clearly.
http://www.hmrc.gov.uk/cnr/hmrc6.pdf
We have applied to HMRC for a new tax code which we give to our employer - they will then exempt us from tax on the PAYE system. All good!
Below, i am quoting an email from an accountant who deals with these things in case it helps anyone in future.
Chris
I recommend that they read the attached carefully all the way through but I've highlighted relevant areas. Like most things I think they have heard part of the story. http://www.hmrc.gov.uk/cnr/hmrc6.pdf
Parts of interest will be: page9 (1.5.13); page 10 (1.5.15), page 12 (1.5.20!new!), page 13 (1.5.22), page 15 (2.2) page 18/19 (3.2)
I think they will be viewed as UK resident (still) and UK Ordinary Resident. Initially they would also be viewed as US resident but the J1 exemption and Double Tax treaty would impact here and influence the dual resident result (US tax advice needed - might have a requirement to submit a US return even if nil).
Part 8.5 (page 52) of the attached might help to clarify (Leaving the UK to work abroad as an employee) but I am concerned that strictly the employment contract is still in the UK with UCL and thus not valid for this treatment. Not sure is 8.9 will help if one of them is moving with a contract with a US entity?
The payment in the UK and contract would make part 9.1.5 interesting reading and I think links to the heart of the hope of being outside the scope of UK taxation but there are conditions which I don't think they will meet ("your remuneration must be paid by (or on behalf of) an employer who is not resident in the UK, and it must not be borne by a UK branch of your employer.")
Page 65 is a good flow chart.
National Insurance - 11.3 - there is a bilateral SS agreement - part 11.4.2 (bottom of page 75 really useful). I don't know if after 12 months you can stop paying NIC but you might want to continue paying towards the state pension (stamp) and hence consider paying it anyhow.
After reading this I would suggest contacting Longbenton NI Contribution Office for advice on NIC and UCL payroll as they will have an obligation under employment tax law to operate the PAYE and NIC properly. Thus avoid legal costs themselves to find out most of the answers.
Parts of interest will be: page9 (1.5.13); page 10 (1.5.15), page 12 (1.5.20!new!), page 13 (1.5.22), page 15 (2.2) page 18/19 (3.2)
I think they will be viewed as UK resident (still) and UK Ordinary Resident. Initially they would also be viewed as US resident but the J1 exemption and Double Tax treaty would impact here and influence the dual resident result (US tax advice needed - might have a requirement to submit a US return even if nil).
Part 8.5 (page 52) of the attached might help to clarify (Leaving the UK to work abroad as an employee) but I am concerned that strictly the employment contract is still in the UK with UCL and thus not valid for this treatment. Not sure is 8.9 will help if one of them is moving with a contract with a US entity?
The payment in the UK and contract would make part 9.1.5 interesting reading and I think links to the heart of the hope of being outside the scope of UK taxation but there are conditions which I don't think they will meet ("your remuneration must be paid by (or on behalf of) an employer who is not resident in the UK, and it must not be borne by a UK branch of your employer.")
Page 65 is a good flow chart.
National Insurance - 11.3 - there is a bilateral SS agreement - part 11.4.2 (bottom of page 75 really useful). I don't know if after 12 months you can stop paying NIC but you might want to continue paying towards the state pension (stamp) and hence consider paying it anyhow.
After reading this I would suggest contacting Longbenton NI Contribution Office for advice on NIC and UCL payroll as they will have an obligation under employment tax law to operate the PAYE and NIC properly. Thus avoid legal costs themselves to find out most of the answers.
Dec 17th 2009, 12:16 am
#10
Lost in BE Cyberspace
Joined: Jan 2008
Posts: 41,518
Re: J1 Visa for the USA - Do i still pay UK tax?
I think it is a little different to caleyjag if you are being paid by a grant through UCL. My husband came here under similar circumstances on a J1 for 6 months but was paid in UK. However, if you can find a way to get paid through the US institution that will be great for you.
