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Paid in UK but live in USA

Paid in UK but live in USA

Old Apr 29th 2011, 8:36 am
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Default Paid in UK but live in USA

Split from http://britishexpats.com/forum/showthread.php?p=9333114

Sorry for bumping this thread but I'm soon going to be in a similar boat to Vinnyvagus's wife when I move to the US and will continue to work for a UK company and I just wondered if there were any further developments RE: paying taxes on a UK earned salary?

While the company I work for is keen to keep me employed after I've moved, right now they're about as clued in on how the tax thing works as I am. From what I can gather, I first need to fill out a P85 form as soon as I know my moving date and send it off to HM Revenue and Customs who will then figure how I will be "treated for UK tax purposes" according to their website. Has anyone gone through this process recently? Just wondering what happens after that.

I'm also trying to work out what the best method is for receiving my salary, whether to continue having it paid into my UK account and transfer it from there, have it deposited in an offshore account, or have it wired directly into a US account.

Thanks in advance

Last edited by meauxna; Apr 29th 2011 at 3:29 pm.
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Old Apr 30th 2011, 2:58 am
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Default Re: Paid in UK but live in USA

It doesn't matter where you are paid but where the work is performed, generally.

You are working in the US with income from a foreign source, but it's still "US income" with a few exceptions. You'll be liable for US income tax on it and you'll need the proper work authorization permits (work visa) to continue working while in the USA. Where you are going to run into some problems is the issue of self-employment tax.

Basically (and please, this is just some basic messageboard chatter--not real tax advice) an American company that hires an "employee" for a salary of $100,000 in reality has to pay something like $106,000 per year. The extra $6,000 or so is for the employer's share of retirement and health care contributions and unemployment insurance (kind of like PAYE expenses in the UK).

The alternative is that you are an "independent contractor" in which case the employer pays you $100,000 and YOU pay the employer's share of those expenses. So instead of your normal withholdings which are say 6% of your income you end up paying both shares, about 12% or so in self-employment tax.

This sucks for you, but is great for your company as they generally avoid any tax filing requirements in the USA.

If they want you as an employee in the USA, then they should probably set up a shell company in the US to handle all the PAYE-like expenses and whatnot. Hassle, paperwork, etc.

Unfortunately, you really need the advice of some professionals on this matter. I've just given you some basic "pub chatter" on how it is and I would strongly recommend seeking some real advice from an accountant who specializes in cross-border transactions and business. It can get even more strange if you start working in multiple states across the US and incur liabilities in those different states (did you know that professional athletes often get hit for taxes when they play away games in another state--it's that crazy).

Good luck.
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Old Apr 30th 2011, 2:54 pm
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Default Re: Paid in UK but live in USA

Originally Posted by penguinsix View Post
It doesn't matter where you are paid but where the work is performed, generally.

You are working in the US with income from a foreign source, but it's still "US income" with a few exceptions. You'll be liable for US income tax on it and you'll need the proper work authorization permits (work visa) to continue working while in the USA. Where you are going to run into some problems is the issue of self-employment tax.
I want to remind OP that the above answer is regarding you US tax liability. I hope you will get an answer on your liabilities towards the UK.

Since you will be resident in the US, you will be liable for US tax on worldwide earned income.
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Old Apr 30th 2011, 4:13 pm
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Default Re: Paid in UK but live in USA

Thanks for the info folks. Much appreciated.

The company I work for is registered in the US for potential future expansion but they're not yet in a position to be able to pay employees from over there. They informed me that the cost of setting this up is pretty substantial and they weren't ready to commit to doing this just yet, not just for one overseas employee (me), opting instead to continue paying my salary from the UK. If a US office does open then this will obviously change.

I'm going to give them a nudge to seek professional advice on this and I'll post my findings here. We've still got a couple of months to go.
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Old May 1st 2011, 10:08 pm
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Default Re: Paid in UK but live in USA

I'm going through similar. My husband is working in the USA for a year and I work for a UK company going on a short term (11 month) assignment to a USA office. I'll actually be doing my UK based job but from the USA so I can be with my husband. I'll be paid in the UK in sterling while in the USA. The quote I got from our relocation department shows the tax in the USA looks about 35% of my salary and I'll be taxed in the UK on the whole amount as usual.
This is looking pretty miserable on the cost front. Anyone know of a better way to handle all of these costs?
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Old May 1st 2011, 11:42 pm
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Default Re: Paid in UK but live in USA

Originally Posted by JLEF View Post
I'm going through similar. My husband is working in the USA for a year and I work for a UK company going on a short term (11 month) assignment to a USA office. I'll actually be doing my UK based job but from the USA so I can be with my husband. I'll be paid in the UK in sterling while in the USA. The quote I got from our relocation department shows the tax in the USA looks about 35% of my salary and I'll be taxed in the UK on the whole amount as usual.
This is looking pretty miserable on the cost front. Anyone know of a better way to handle all of these costs?
Do you have work authorisation to do the work in the US? Doesn't matter where you get paid.

And there's also the dual tax treaty, so unless you're making serious coin, you wouldn't be paying tax twice.
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Old May 1st 2011, 11:51 pm
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Default Re: Paid in UK but live in USA

Yep I'll have an L1 and the dual tax treaty only applies if I work less than 183 days in 12 months and I definitely don't earn a lot!! Apparently it's federal + state + wage tax and includes employer + my contributions.
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