Superdarts

Hi All,

I recently lost my job and have been offered a 4-6 month short term contract (day rate) in the UK. I have been in the US for 6 years, visiting the UK for no more than 3 weeks in any given year and have a green card.

Does anybody have any experience on the tax exposure / best way to address?

I received a severance package from my last employer and don’t want to expose this to UK tax.

Any feedback greatly appreciated.

Glasgow Girl

I am sure you are aware that as a green card holder you are required to pay US tax on all worldwide income regardless of the country you live in although you will get credit for any tax paid to the UK.

On the UK side of things you should qualify for split year treatment and so only pay UK tax on the income received after you arrive back in the UK, therefore assuming you received your severance package before you arrive back in the UK it should be safe from UK tax. Also, if you received it prior to the next UK tax year which starts 6 April, and don’t arrive back in the UK until after that date then it wont be taxable in the UK.

Going forward if you are only working a partial year in the UK, it is very likely that the UK tax will be less than the US tax because you will benefit from the full year UK tax free allowances. Since the US will tax you on the UK income as well as your US income, you will likely find that after you apply the credit for UK taxes paid you will still have a balance to pay to the US.

In short, your severance package should be safe from UK tax. Although you will pay UK tax on earnings made while resident in the UK, because of the tax credit that you will get from the IRS for the UK tax paid on your UK earnings, the net IRS tax bill should be the same whether you earned the money in the US or the UK and that is going to be your highest tax liability/

Superdarts

Thanks for the response -

it’s very confusing online. I was reading that if I was in the Uk less than 182 days, I would remain as non resident? Assume it makes no difference if I do a 1099 and invoice from the U.S? Is there a number of days cut off that I could work in the UK, invoice from U.S and only pay the tax in the U.S?

Unfortunately I have a 2nd severance payment due at the end of May so that may be the dealbreaker.

Glasgow Girl

I think you will be considered non domiciled in the UK because you have a permanent home in the US and have no intention of returning to the UK. If you are in the UK for less than183 days then you would also be non resident. But in any case any case being non domiciled would mean that you pay UK tax only on earnings arising from work performed in the UK, or for work performed for a UK based company. You might want to google non domiciled UK tax liability to find out more. If non domiciled I believe that your severance package will not be taxed on the UK.

Pulaski

Agreed, generally. If you're "non-domiciled" then you would be taxed in the UK on income from outside the UK only if it was remitted to the UK - the "remitance basis"