Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

Taking Income from UK Company

Taking Income from UK Company

Old Mar 14th 2014, 10:42 am
  #1  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Taking Income from UK Company

I think I saw a thread covering this scenario, specifically for an L-2 visa holder, but I just want to be absolutely sure I've got it right.

I'm currently the sole director and shareholder of my own limited company in the UK. I'm also the company's sole employee, doing consultancy work. I take a monthly salary and dividend which in total is significantly less than the company's monthly income, so there will be a large amount remaining in the company when we move over to the US in the summer.

I'm not planning to continue working at all, and clearly won't be permitted to until I get my EAD. However, what I gathered from the previous thread was that I may continue to take both a monthly dividend and salary from my company. This would enable me to extract the rest of the money from the company in the most tax-efficient way.

Is this definitely permitted before I have my EAD? Just worried that it might look like I'm working if I'm drawing a salary?
Lucybell33 is offline  
Old Mar 14th 2014, 2:19 pm
  #2  
Account Closed
 
Joined: Aug 2002
Location: Kentucky
Posts: 38,867
ian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Lucybell33 View Post
Is this definitely permitted before I have my EAD?
You are allowed to get passive income, yes. The restriction is on employment... not income!

Ian
ian-mstm is offline  
Old Mar 14th 2014, 2:31 pm
  #3  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by ian-mstm View Post
You are allowed to get passive income, yes. The restriction is on employment... not income!

Ian
Thanks for getting back to me, Ian. Dividend income sounds fine then, as this is passive, but won't the salary part look like employment income - I am technically employed by my company and this is what it pays me...

Sorry to keep asking, but just want to be absolutely clear, and not do anything wrong!
Lucybell33 is offline  
Old Mar 14th 2014, 2:36 pm
  #4  
JAJ
Retired
 
JAJ's Avatar
 
Joined: Apr 2004
Posts: 34,649
JAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond repute
Default Re: Taking Income from UK Company

I'd strongly recommend some U.S. professional tax advice on the tax consequences in the United States of this strategy. Including the U.S. Controlled Foreign Corporation rules and the information reporting required on form 5471.

And the best time to understand the options and take any necessary steps to restructure to avoid tax complications is usually before becoming U.S. tax resident.
JAJ is offline  
Old Mar 14th 2014, 2:37 pm
  #5  
Account Closed
 
Joined: Aug 2002
Location: Kentucky
Posts: 38,867
ian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond reputeian-mstm has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Lucybell33 View Post
I am technically employed by my company and this is what it pays me...
The US has no interest in whether or not you're employed by a company outside of the US. As long as you are not actually working for that company while inside the US (until you get the EAD), it's a non-issue. Many people with contracts in the UK take a 3-month (or so) respite, kick back, and resume employment when their EAD arrives. If you receive money for not working, it's good for you and a non-issue for US immigration.

Ian
ian-mstm is offline  
Old Mar 14th 2014, 2:50 pm
  #6  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by JAJ View Post
I'd strongly recommend some U.S. professional tax advice on the tax consequences in the United States of this strategy. Including the U.S. Controlled Foreign Corporation rules and the information reporting required on form 5471.

And the best time to understand the options and take any necessary steps to restructure to avoid tax complications is usually before becoming U.S. tax resident.
Thank you - yes, I will do. We will get consultations with Deloittes tax advisers in the UK and US at some point as part of the relocation package (still waiting for the final go-ahead). Just trying to get pre-armed with as much knowledge in advance, especially as my accountant is currently working on my payroll ready for the fast-approaching start of the next tax year.
Lucybell33 is offline  
Old Mar 14th 2014, 2:50 pm
  #7  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by ian-mstm View Post
The US has no interest in whether or not you're employed by a company outside of the US. As long as you are not actually working for that company while inside the US (until you get the EAD), it's a non-issue. Many people with contracts in the UK take a 3-month (or so) respite, kick back, and resume employment when their EAD arrives. If you receive money for not working, it's good for you and a non-issue for US immigration.

Ian
Sounds great - thank you!
Lucybell33 is offline  
Old Mar 14th 2014, 2:57 pm
  #8  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 47,692
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Lucybell33 View Post
Thank you - yes, I will do. We will get consultations with Deloittes tax advisers in the UK and US at some point as part of the relocation package (still waiting for the final go-ahead). Just trying to get pre-armed with as much knowledge in advance, especially as my accountant is currently working on my payroll ready for the fast-approaching start of the next tax year.
The requirement for withholding tax on company dividends paid by British companies is such that drawing a salary is likely more tax efficient than declaring a dividend.
Pulaski is offline  
Old Mar 14th 2014, 3:05 pm
  #9  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Pulaski View Post
The requirement for withholding tax on company dividends paid by British companies is such that drawing a salary is likely more tax efficient than declaring a dividend.
So, I won't get the tax relief on UK dividends that I can currently take advantage of in the UK?

I guess that should have been obvious, as the corporation tax in paid in the UK not the US. Hmmm - sounds like I might need to give myself a bit of a pay rise!

Last edited by Lucybell33; Mar 14th 2014 at 3:22 pm. Reason: Being stupid
Lucybell33 is offline  
Old Mar 14th 2014, 3:23 pm
  #10  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 47,692
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Lucybell33 View Post
So, I won't get the tax relief on UK dividends that I can currently take advantage of in the UK?
Not sure about that, that would definitely be one for your accountant. .....The issue is convoluted and relates to "unrelieved ACT", which is essentially the company paying more withholding tax (Advance Corporation Tax or ACT) than it will be ever be liable for as corporation tax (ACT is a 1:1 credit against Corporation Tax). Although I will definitely defer to your tax accountant at Deloitte, I suspect that unrelieved ACT paid by a corporation cannot be set against personal tax liabilities in the US.
Pulaski is offline  
Old Mar 14th 2014, 3:42 pm
  #11  
Forum Regular
Thread Starter
 
Lucybell33's Avatar
 
Joined: Nov 2013
Location: San Jose, CA
Posts: 263
Lucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond reputeLucybell33 has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Pulaski View Post
Not sure about that, that would definitely be one for your accountant. .....The issue is convoluted and relates to "unrelieved ACT", which is essentially the company paying more withholding tax (Advance Corporation Tax or ACT) than it will be ever be liable for as corporation tax (ACT is a 1:1 credit against Corporation Tax). Although I will definitely defer to your tax accountant at Deloitte, I suspect that unrelieved ACT paid by a corporation cannot be set against personal tax liabilities in the US.
OK - thank you for your time once again. Will stop bothering you guys and patiently await my consultation with Deloittes!
Lucybell33 is offline  
Old Mar 14th 2014, 3:52 pm
  #12  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Lucybell33 View Post
So, I won't get the tax relief on UK dividends that I can currently take advantage of in the UK?

I guess that should have been obvious, as the corporation tax in paid in the UK not the US. Hmmm - sounds like I might need to give myself a bit of a pay rise!
What may be a tax advantage in the way a company is setup in the UK may be a tax disadvantage in the US. In the US, corporate income taxes are separate from individual income taxes and therefore profitable small businesses seldom setup as an equivalent LTD (C Corp) in the US since they'd be paying two separate income taxes (double taxation). Usually a C Corp is primarily for large businesses with expensive lawyers and accountants that can save taxes with complex accounting practices.
Michael is offline  
Old Mar 14th 2014, 5:05 pm
  #13  
BE Enthusiast
 
Joined: Nov 2012
Posts: 822
Cook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond repute
Default Re: Taking Income from UK Company

You could owe up to 23.8% in US tax plus State tax on the dividends but you may owe more if there is any subpart F income in the company including personal services income. You'll have to balance against that the cost of the extra 5471 filing you'll be paying Deloitte to prepare.
Cook_County is offline  
Old Mar 14th 2014, 6:07 pm
  #14  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Cook_County View Post
You could owe up to 23.8% in US tax plus State tax on the dividends but you may owe more if there is any subpart F income in the company including personal services income. You'll have to balance against that the cost of the extra 5471 filing you'll be paying Deloitte to prepare.
The dividends will likely be taxed as normal income (39.6% maximum). Unless they are qualified dividends (probably unlikely unless specific US accounting practices are used by the corporation), I don't believe there will be any tax breaks.

Last edited by Michael; Mar 14th 2014 at 6:11 pm.
Michael is offline  
Old Mar 14th 2014, 6:16 pm
  #15  
BE Enthusiast
 
Joined: Nov 2012
Posts: 822
Cook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond reputeCook_County has a reputation beyond repute
Default Re: Taking Income from UK Company

Originally Posted by Michael View Post
The dividends will likely be taxed as normal income (39.6% maximum). Unless they are qualified dividends (probably unlikely unless specific US accounting practices are used by the corporation), I don't believe there will be any tax breaks.
I was working on the qualified rate of 20% plus the NIIT at 3.8%. As the US and the UK have a treaty dividends from a CFC can be taxed at qualified rates.
Cook_County is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.