Zez

Can anyone confirm my understanding of the tax position!!

We would be seconded out there by a uk company for 2 years.

Therefore we have to continue to pay class 1 Ni at 11% but due to a reciprocal agreement would be exempt from social security tax of 6.2% and Medicare of 1.45% over there. Is that it?

I don't get the hmrc website!!!!

Thanks again

md95065

Not enough information to give an answer.

What visa are you getting and where will you be paid?

If you are on an intra-company transfer visa (L1) and you are being paid in the US it is my understanding that you will pay both Social Security and Medicare taxes in the US.

If it is some other arrangement then you need to tell us what it is ...

Zez

L1. Will be paid in us by uk company. seconded out for less than 5 years...Hmrc seems to suggest you are therefore liable to uk Ni but due to reciprocal arrangement don't have to pay both.

Having to pay us and uk taxes would be a massive social security burden and could be a deal breaker so trying to understand it!!!

Zez

Hmm, hubby got it wrong...h1b as hubby wouldn't have worked for them for a year pre transfer.

md95065

If he is in the US on an H1-B visa and being paid in the US I am not aware of any way that either he or the company can avoid paying both Medicare and Social Security taxes in the US in addition, of course, to Federal and State income taxes.

I don't know what the situation is with regard to UK NI contributions but I don't understand why he would have to keep making class 1 contributions.

RICH

You do not have to pay tax/ni in both countries on the same income, that is basically what he reciprocal agreement agrees.

MsElui

on an L1 you can pay NI thing/not pay ssn/medicare for i think 3 years. (at least they told us that). We moved to a local hire contract before the three years are up -so stopped NI and started SSN so i cant say what would happen at that point.

however as pointed out an L1 is a transfer and we were already working for that company and payed in the uk before the move. How that differential applies to an H1 i couldnt say.

nun

An H1-B allows US employers to employ foreign workers. Therefore, as you'll be working for a US company you will have to pay Federal and state income taxes as well as FICA and Medicare. There will be not liability to UK income tax or NI

If you will be classed as a US resident alien for tax purposes you will also have to pay US tax on your worldwide income, you might also have a UK tax liability on UK source income so you'll have to navigate the tax treaty and methods of receiving relief from double taxation. Also be aware that the taxation of UK pensions, ISAs and pooled investments like tracker funds/unit trusts can be complex and might need a tax professional. Your company should pay for someone to do your taxes.

Talk to your HR depts in the UK and the US it is their responsibility to get this stuff right not yours! although you need to be concerned and aware of everything.

Zez

It's a uk employer with us office who hubby will be newly employed by and then seconded to us. Is that still h1b

Texan Charlie

I can shed some light on this as I am going through this at the minute. I am about to transfer over to the US on a L1 visa for a 2 year secondment. My company has paid for UK and US tax advice (your husband really should try and get this paid for…) from one of the big 4 accountancy firms.

There is a reciprocal agreement between the UK and US for temporary (i.e. less than 5 years) assignments. This is non-optional – I specifically asked whether I could chose to pay social security/NI in the US or UK and was told you can’t, you have to pay in the UK when on a temporary assignment (I have the right to return to my job in the UK at the end of the assignment, UK employment rights override Employ at Will laws etc. etc.)

You will need, however, to fill in a P85 form and send to HMRC (tax advisers should deal with the logistics) and when you get a certificate (up to 3 months) you can get a US social security exemption which gets backdated.

Note a couple of things:

- The UK rate is higher (11.8%) between £7.5k – 42k but then only 2% on amounts above that, whereas the US rate is 6.2% SS + 1.45% Medicare with no untaxed initial amount or reduced rate till $114k (for SS only). Therefore, you’ll be worse off if you’re around £40k/$65k but it evens out by the time you get toward $100k
- Ignoring the cash effect – clearly there are benefits for pension etc. if the plan is to return to the UK
- No idea what the rules are on an H1B – get tax advice (did I say that already?)

Zez

Taxan Charlie - have you already been employed by the UK company for over 1 year? In my hubby's situation, he would be new to the UK company so I wonder if it is at all possible for him to go to the US without having first worked for the UK company for 1 year......this system is all very confusing!

Texan Charlie

Yes - I have been here over 1 year.

If you husband hasn't worked for the company for 1 year (in the last 3 I think) he wouldn't be eligible for a L1 visa and would require an H1B I think, but I'm no expert.

That certainly reduces his leverage to get things paid for I guess, depending on whether they could get someone else with his skills elsewhere easily?

In my situation I was clear the firm were paying for everything like tax advice, visa attorneys etc as they are asking me to go out there and the alternative is I stay in the UK and don't have to deal with the headache of dual tax treaties etc...!

nun

Only you know the visa he'll be on. If it's an H-1B then US income tax, FICA and Medicare are all due. An H-1B requires a US sponsor. You should be asking the company HR department all these questions and they should have the answers. Do not start the assignment until they have answered them to your satisfaction. They should be paying for an accountant to do your taxes and offering tax equalization as well.

Bob

You need to have a little read of the wiki here to get a better understanding of things.

L1 is a company transfer, must have worked a year with the company within the previous 3 years. Spouse gets a L2 and would be able to apply for a EAD at cost, to be allowed to work.

H1B, new employee, employeed by a US company. Spouse can not work. Unless it's academic/research based, there's a quota cap, they apply in April for a following October start. US taxes are due.