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9 Month Contract – Tax Advice

9 Month Contract – Tax Advice

Old Oct 5th 2009, 3:07 pm
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Default 9 Month Contract – Tax Advice

I’m moving to Texas in November for up to 9 month working for a sister company. I’ve currently got an application for an L1A Visa going through. I will still be paid in GBP’s by my UK company into my UK bank account. I’ve been advised to complete a HM Revenue & Customs P85 form when I leave and a P86 when I return. Is this correct?

Will I be expected to pay any US Tax and will I still be charged UK Tax at current rates?


Regards,

Jonathan
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Old Oct 5th 2009, 3:29 pm
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Default Re: 9 Month Contract – Tax Advice

Huh? Why would you file a P85 when your stint abroad is only temporary? Plus you are being paid in the UK, in GBP, the whole time.

If you are paid in the UK then you pay tax in the UK. The UK and US have a tax treaty between them so they can sort that out.

Doesn't make sense to me.
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Old Oct 5th 2009, 3:39 pm
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Default Re: 9 Month Contract – Tax Advice

My understanding is that if you're only going to be away for 9 months, the UK will consider you to be "non resident but ordinarily resident" and you would pay both UK and US tax on your US income, but would be able to claim "foreign tax credit relief" for the amount of US tax paid.

i.e. US gets first dibs on taxing you, as you will be physically resident in the US. The UK also taxes you, as you are ordinarily resident in the UK, however you don't get taxed twice as you can credit the US tax paid towards your UK tax bill. End result for you: you pay tax as if you were living in the UK.

The one area to look at might be social security/national insurance contributions. I'm not sure, but you might be able to avoid paying US social security/medicare tax, while paying voluntary UK NI contributions at 2 quid a week.
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Old Oct 6th 2009, 9:38 am
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Default Re: 9 Month Contract – Tax Advice

Thanks for your replies. Would the US tax be an administrative task or would I actually pay it and then claim back? If the latter, then how would I be charged it as I wont be being paid anything in the US.

The reason I was going to fill in the HM Revenue & Customs P85 & P86 forms was that I phoned HM Revenue & Customs and explained the situation (same as I put on here) and this was there instructions. My boss asked me to double check this which is why I started searching the Internet and found this site.

Just to confirm, I will still be paid by our UK company (there will be no cross charge to the US company) and the costs for my US accommodation and rental car will be picked up directly by the US company without touching me.
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Old Oct 6th 2009, 11:46 pm
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Default Re: 9 Month Contract – Tax Advice

But if you reside long enough in the US, you are liable for income tax in the US, regardless of where the money is coming from.
I think the cut off is 180 or 183 days. Then again, is that per calendar year? Soemthing to look at.
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Old Oct 7th 2009, 12:43 am
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Default Re: 9 Month Contract – Tax Advice

Originally Posted by meauxna View Post
But if you reside long enough in the US, you are liable for income tax in the US, regardless of where the money is coming from.
I think the cut off is 180 or 183 days. Then again, is that per calendar year? Soemthing to look at.
It *may* be possible to prove a closer connection to the UK and file a 1040NR, thus having no US source income. Don't know if you can legitimately do that on an L1.

Last edited by AdobePinon; Oct 7th 2009 at 12:52 am.
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Old Oct 7th 2009, 12:49 am
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Default Re: 9 Month Contract – Tax Advice

Originally Posted by jsstevo View Post
Thanks for your replies. Would the US tax be an administrative task or would I actually pay it and then claim back? If the latter, then how would I be charged it as I wont be being paid anything in the US.
You file your taxes in April, send them the money owed, unless your contracting, which case you file quarterly...
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