bostonwilly

Hi all,

I've agreed an offer for a job in Boston. It's dependent on a visa and COVID travel restrictions being lifted so tentative start date is later this year. In the meantime I will start contracting for this company from the UK for which I've got two options: 1) set up a Ltd company or 2) work through an umbrella company.

For the Ltd company: I've read about withholding tax being applied at source unless filling out a W8-BEN form, although I'm not sure if this will apply to me if I setup a UK Ltd company for this contracting - I think my company should just get paid the full without any withholding tax, is that right? However, if I then move to the USA and work for that same client as an employee during the same US tax year I presume things could get messy. I can't imagine this is a unique case, after all contractors become employees fairly routinely in various ways, so I hope that someone here has some experience or some knowledge of how this will work in practice.

If I use an umbrella company they'll pay me as PAYE in the UK and I'll obviously pay more tax, but I think there won't be any confusion with the USA tax situation when we later move to the USA. If anyone knows different please tell!

Final possibly relevant point: we've been living and working in France for the past few years so I'm not currently resident in the UK, only moving to the UK to start this contracting. This means I'll be resident in France, UK and USA during the same tax year! (whoops!).

Cheers

tht

What makes you think they are your only 2 options? Why can’t they just pay you as an individual 1099 (remember to gross up for employer SS and benefits)?

Given the number of days left in the UK and US tax years being resident is not a given, but either way you just file tax’s in multiple places. The key is understanding where the tax is legally due, DT treaties only give a credit if the tax is legally require to be paid… so you can’t just pick where to pay and get a credit.

petitefrancaise

I was wondering exactly which visa was being offered which the OP thinks is going to get him here this year.
Your information is totally reliant on him being able to work legally in the USA without an employer sponsored visa which doesn't seem to be the case.

tht

no idea what visa he can get, but they can work offshore as a 1099 without a visa.

LegalEagleTX

You are likely to be classified as an employee, regardless of your residence and whether you work through an interposed company. Not only will this complicate your tax situation, but your employer's tax situation will become equally complicated.

bostonwilly

Hi all,
Thanks for your replies.

tht: I've not come across the 1099 form before, thanks for telling me about it, I'll look into it. About tax residency I looked into it and if the dates work out as I expect (as I've been told) then I'll be tax resident in the UK then in the USA. Is a 1099 form applicable if I'm working from the UK and not tax-resident in the USA at that time? Maybe I will be tax resident in the USA later that tax year, but maybe not, it depends on visa and COVID.

petitefrancaise: It's an O-1 visa which the company is going to put me forward for. Whether or not I'm a good candidate is for them to judge. In terms of timescales I'm only going on what the company's visa organisers have told me.

LegalEagleTX: Interesting you say I'll be classed as an employee, I was wondering about this. Is that because even working via an interposing company I'll look like a "hidden employee" or "embedded contractor"? Like IR35 in the UK? Or are there other reasons you think I'll be classed as an employee? Do you think the IRS would retroactively treat my income whilst in the UK as employee income? That would certainly make it interesting as that will be before I have a visa...

Cheers

tht

A 1099 is just a tax form like a W2, a company and in some circumstances an individual need to complete these and send 1 copy to the IRS and 1 to the person they paid more than $600.

https://www.irs.gov/pub/irs-prior/f1099msc--2020.pdf

They may or may-not issue one, if your doing the work in the UK and they remit the income to you in the UK it’s not really relevant because the UK would be taking you anyway not the ITS and you may not even have a tax ID to match it with. That said if you then moved and got a SSN in the same US tax year you may get issued at the end of the year.

The idea is to make sure people declare the income they receive with no tax deducted.

I don’t see how the UK can enforce anything on a US based firm if they have no UK operations like IR35, that’s for UK employers and employees trying to avoid tax. You can’t really be a hidden employee if they have no way to employ you there.

Plenty of US companies pay people outside the US for services performed outside the US.

LegalEagleTX

Whether you are an employee is a question of fact looking at your role and your relationship with your 'employer'. In the UK an interposed company no longer has a bearing on this, but can go to who has the withholding/reporting obligation. A U.S. 'employer' is unlikely to have a U.S. withholding/reporting obligation for payments to nonresident aliens for services performed outside the U.S., but, if the services are performed in the UK, may have a UK one -> https://www.gov.uk/guidance/understa...l-working-ir35.

LegalEagleTX

They can file a claim as creditor in U.S. courts.

tht

if they are that worried they can use a service provider who is set up to deal with this type of situation:

https://www.letsdeel.com/employ

bostonwilly

Hi all,
Thanks for the extra info.

If the US company has no legal entity in the UK then I struggle to see how they could be liable to taking tax or whatever in the UK, but perhaps entirely possible.

I presume Let's Deel is like an umbrella company?

So far I don't think there's anything concrete to say that working remotely from the UK through another company (mine or an umbrella) would be a problem for US tax is there?

Cheers

Nutmegger

It is not necessary for a US company to file a 1099 for a non-US independent contractor who is performing services outside the US. And it would be difficult to attempt to do so anyway, as you don't have either a social security number or employer ID. As you won't have any US tax obligation for this contracting, you would be better off just billing for your services and then taking care of your UK taxes on your earnings. I work for entities outside the US, and as they don't send me any kind of tax form, I just keep a record of what I earned and report it to the IRS on my annual tax return (while filing estimateds quarterly).

bostonwilly

Hi @Nutmegger,

That's what I was thinking of doing. I was even thinking of making life very easy (though not super tax-efficient, nor without risk) and just working as a sole-trader and doing my tax return at the end of the year without worrying about Ltd company or umbrella company stuff. Certainly quite an attractive idea.

Cheers

LegalEagleTX

UK tax obligations do not require a tax payer to have a legal entity in the UK.

bostonwilly

Thanks LegalEagleTX