Hi, and welcome to the forum.
My, you certainly are in a complicated situation, but one that is coming up more and more frequently these days.
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Originally Posted by gscotto
My assumption regarding my tax liability is that I will be responsible for both US and UK tax and the amount will be determined by the number of days I spend in each country. So, for example, if I am only working in the UK for 1 week a month I would only be required to pay UK tax for the 1 week. I will have to keep track of all this myself and be prepared to pay the required tax at the end of the year (or hire a good accountant to sort it out for me).
• Am I thinking through the tax part correctly?
• Is there a better way to have the UK company pay me so that I can limit my tax exposure?
• Any other ideas on a better way to set this up?
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Actually, no, your thinking on this is not correct. Your tax residence determines where and to whom you pay your taxes. In your case, you are still resident in the US, so you continue to pay US income tax. In order to exempt any of your income from US taxation, you would have to be resident in the UK for an entire year (tax/calendar year or 360 consecutive days).
And, as a US citizen, you are always liable for US taxes anyhow - although you may elect to exclude certain foreign income if you can establish your residence abroad. (See Form 2555 and instructions or publication 54 for those details, though they don't apply to you in this case.)
To be tax resident in the UK, you would have to be present there at least 183 days of a tax year (which runs from April 6th, I think it is - not a calendar year like in the US) - though that isn't a hard and fast condition - it's supposed to be judged according to "facts and circumstances." (Tax law and its vagueness is one constant around the world!
)
You may want to review your payment arrangement with your UK employer. It's fine to be paid from the UK in pounds (actually, probably an advantage these days!) but they can't really pay you as a "regular employee" because you aren't eligible for NHS or any of the UK national insurances and you shouldn't have UK income tax withheld from your salary. What are you doing, for example, about health insurance? Or US Social Security? Ideally, they should be paying you through their US subsidiary, which would have an Employer i.d. number and would do all the proper withholdings for taxes and benefits. If they have a US subsidiary, they may be able to work something out in that area.
In essence, it might be better to be paid as a contractor or consultant, and then you file and pay your own quarterly statements with the IRS to pay US income taxes and Social Security, plus buying your own health insurance. Unless I'm mistaken, you should not owe any UK income tax if you're only in the country for 12 weeks a year - though someone in the personnel office of your UK employer may be able to clarify that for you.
Quote:
Originally Posted by gscotto
• Do I have the UK Company sponsor me for a Work Permit even though I won’t be living in the UK permanently?
• Do I apply for a Business Visa? Not really sure what benefits this will give me and the information I have been able to find on UK Business Visas make it seem that this visa doesn’t apply to my situation.
• Or, do I just enter the UK on regular visitor visas every month? This seems risky as I will technically be working for a UK company and paid in pounds.
• Also, how does my spouse settlement visa (expires August 2009) play into all of this? As noted, I'm assuming because of the residency requirements it's no longer valid.
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You shouldn't need a visa for what is, in fact, a recurring "business trip." The immigration agent at the airport will want to know that you are on a business trip and that you are only staying for a week (or so). I entered the UK with my work permit still stamped in my passport - both before and after it expired, though I was no longer working for the company. Since you are no longer resident in the UK, that explanation should suffice if anyone questions you on it.
It all sounds pretty complicated at the moment, but once you get through one or two cycles, it will get lots easier.
Cheers,
Bev