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L1b visa - tax while in the UK

L1b visa - tax while in the UK

Old May 14th 2012, 12:54 pm
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Default L1b visa - tax while in the UK

Hi
My husband and I recently got our L1 and L2 visas. We will be moving to Pleasanton hopefully around August as we would like to delay the move so we can wrap things up here in the UK. renting out the house etc. plus we got olympic tickets

My question is, does he have to pay US tax while working from the uk? He works remotely from home. We both think he needs to pay UK tax. But we dont really want to pay double tax if we can! He still doesnt have a SSN in the US.

He used to be a self employed contractor. Now that the company in the US has formally hired him, does he need to pay uk and us taxes whlie we wait for our big move? The company will be paying him in us dollars in our newly opened bank account in the US

Thanks!
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Old May 14th 2012, 1:34 pm
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Default Re: L1b visa - tax while in the UK

Hi and welcome!

A couple of things.

You won't have to pay double tax - there is a tax treaty between UK and USA, as there are between most countries.

We had similar situation to you.

The short answer is no! At least, we didn't.

We got our visas on 19 Sep, but didn't move to the US until early Nov.

When you come to do your first year tax return in the US - everybody has to do one, and usually use 1 of a few software products to do it - anyway, when you come to do your tax return, the software will take care of this for you. You enter the date you entered the US as this is effectively when you become liable for US tax. The equivalent of the P60, known as the W2, will detail everything you need to put in to the software. The move dates, move expenses not paid by the company, and any stock transactions that you made after arriving in the US will need to be accounted for too. Not normally an issue and I'm thinking in particular about restricted stock units that many companies give employees.

When you do come to leave the UK you can claim back any UK tax via form P85. Complete this as soon as you have P45 from your UK employer. Keep open at least one UK bank account and credit cards too.

The only possible complication is whether you are being paid by the US company at the moment, or if your husband continues to get paid by the UK company until you move. This is the situation we had and it was simplest. If your husband is now being paid by the US operation paid in USD in to a US bank account, then I'm pretty sure things get a little muddier.

That said, you should only pay tax once.

I strongly suggest that when it is time to do your first tax return, you get a professional to do it. You have income from house rent to account for too, and if you have kids or other dependants, that affects tax too.

Here on This forum, you'll find many recommendations for a chap called Pete Newton. He's a Brit, US based, and licensed to deal with tax matters in both UK and US. Very helpful chap.

You may find you like living in the US, and your US company likes you more too, and you apply for your Green Cards. You don't want any tax issues in the US hanging over your head. The UK tax authorities can get to you through the US tax authorities as well, so leaving the UK does not mean you can escape any UK tax liability (as a colleague once found out!).

You'll find this forum very helpful about specifics. There is a bit of banter, and you can help yourself on the forum by searching for previous threads on what ever topic you have - any problems you run in to have almost certainly been covered in the foum before! Also, explore our wiki, it has all sorts of good info for the move, both before and after, especially about credit, housing, cars and health care - make sure your US employer is giving really good health cover and at a very good price because there is nothing like the NHS in the US, and anything and everything pretty much costs.

Start with this posting, it will take you to relevant parts of the wiki.
http://britishexpats.com/forum/showthread.php?t=753211

Again, welcome and good luck!

Cheers

Harry The Spider
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Old May 14th 2012, 1:52 pm
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Default Re: L1b visa - tax while in the UK

Originally Posted by mhynne View Post
Hi

My question is, does he have to pay US tax while working from the uk? He works remotely from home. We both think he needs to pay UK tax. But we dont really want to pay double tax if we can! He still doesnt have a SSN in the US.

He used to be a self employed contractor. Now that the company in the US has formally hired him, does he need to pay uk and us taxes whlie we wait for our big move? The company will be paying him in us dollars in our newly opened bank account in the US

Thanks!
It sounds as if he is receiving US source income, in which case US tax should be withheld by his US employer. You should talk to his employer and ask how they are dealing with payroll and whether they will be sending him a W4 to complete (W4 is an IRS tax form that helps in calculating the tax to withhold from your salary). While you are a UK resident you will also have to pay UK tax on any US source income, but you can take a credit for any US tax you pay. You should talk to HMRC about how to declare foreign income and look at form HMRC form SA106 and file a P85 when you leave the UK.

Look into making UK voluntary Class 2 NI contributions.

As an aside you should make sure you understand the tax implications of becoming US resident for any UK accounts you have. Owning certain types of UK investments can lead to complex and expensive US tax issues. Avoid any UK unit trusts or other pooled investments outside of pension plans, so if you have a stocks and shares ISA you should either sell it or know how to deal with it on your US tax return and make sure you know how to deal with your UK pension accounts for US tax purposes.

Last edited by nun; May 14th 2012 at 2:03 pm.
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Old May 14th 2012, 2:30 pm
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Default Re: L1b visa - tax while in the UK

Although there are tax treaties for double taxation, if you expect to be living in the US long term or permanently, you may want to sell your home within 3 years after you move. The US taxes worldwide income and if you sell a primary residence (lived in the home for 2 of the past 5 years), there is a capital gains exclusion of $250K when filing single and $500K when married filing jointly. If you sell the home after the three years, the property is considered investment property and there isn't any exclusion and you will then pay a maximum of 15% tax on any gain.

However if the UK charges capital gains tax on the sale of the home, those taxes paid can be used to offset taxes owed to the US for the capital gains on the sale.
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Old May 15th 2012, 3:03 pm
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Default Re: L1b visa - tax while in the UK

thanks for your replies. From what we have read it looks like he will have to pay US tax. as his Us company will pay him in US dollars on to a US bank account. But it looks like he wont have to pay UK taxes. bec he needs to be working in the UK for at least 6 months from the start of the tax year.
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Old May 15th 2012, 4:45 pm
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Default Re: L1b visa - tax while in the UK

Originally Posted by mhynne View Post
thanks for your replies. From what we have read it looks like he will have to pay US tax. as his Us company will pay him in US dollars on to a US bank account. But it looks like he wont have to pay UK taxes. bec he needs to be working in the UK for at least 6 months from the start of the tax year.
What is your husbands UK residency status. How long has he lived there etc.
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Old May 15th 2012, 4:46 pm
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Default Re: L1b visa - tax while in the UK

My husband is British. Born and raised.
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Old May 15th 2012, 5:05 pm
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Default Re: L1b visa - tax while in the UK

Originally Posted by mhynne View Post
My husband is British. Born and raised.
So he is probably UK domiciled and if you have been living in the UK up to now then HMRC will tax your husband's income and assets on an arising basis, so you will have to pay UK income tax on his US wages.
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Old May 16th 2012, 6:06 pm
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Default Re: L1b visa - tax while in the UK

Ok so we have spoken to a tax accountant.
They said that since we will be leaving part of the tax year and my husband will still be considered a resident in the UK. bec of the number of days he has been in the country. He is self employed by the way so he has to do this himself not through the company.
But basically we dont have to pay double tax. We will pay the UK though the difference in tax by the next end of tax year. Meaning the US will tax us 30% then the UK will tax us 10% bec of the difference (UK income tax is 40%). He will still need to file his taxes next year in the UK.
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