Tax/Visa Help

[gscotto]

Greetings,

Pardon me if I am posting this to the wrong forum, but I need some help.

I have a situation that I need some advice on and I’m hoping someone on this forum has dealt with this particular issue or has experience on the matter. I am willing to pay for professional advice if necessary.

I am a US citizen and will be working remotely from the US for a UK company and travel to the UK a minimum of 1 week a month to work onsite. During busy times I may be working onsite in the UK for 2 weeks or more at a stint. I will be paid directly from the UK company and be their permanent employee (not paid as a contractor or consultant). I believe my monthly salary will be paid into a UK bank account (which I will have to set up)… I will then be transferring money to my US account as needed.

TAX/Salary Payment Arrangement

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?
Which Visa?

I am actually married to a UK citizen and currently have a spouse settlement visa (which may no longer be valid because I have been out of the UK for more than 180 days consecutively). We had moved over to the UK in August 2007 with the intent of settling there but due to family issues and another job offer in the US, we left the UK in November 2007 and have not returned. So my assumption based on my new situation (not settled permanently in the UK), I will not be able to use my current settlement visa (a bit of a waste of money, I know), and will have to apply for a new visa to allow me to work in the UK part time.

• 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.
I know I have a lot of (seemingly) difficult questions here, which is why I offered to pay for professional advice, but I figured I would try to post here first and see if anyone may have some information they can share.

Thank you in advance for any information you may be able to provide.



Regards,

George

[Bevdeforges]

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.

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?

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.

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.

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

[twostep]

A very good immigration attorney may not be a bad idea. Unless memory fails me there is an income reporting system US/UK in place. Is your "position" based in the UK or US?

[taxing]

Originally Posted by Bevdeforges

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).

Kind of. There's no 360-day rule.

To be more specific, you can exempt up to $85,700 from federal income taxes if that money is earned while you are overseas and you meet either one of the following requirements:

(A) You are out of the USA for at least 330 days out of one or more overlapping 12-month periods that, taken together, cover the tax year in question. This is called the Physical Presence Test; it can be confusing at first and it's definitely worth reading Publication 54 carefully. In the simplest case, if you are out of the USA for at least 330 days of a calendar year, then you're eligible to take the $85k exclusion.

(B) You can demonstrate "Bona Fide" residency in some other country. That would mean you have residency papers, a home, a job, and so on. There's no specific set of criteria; if you are called on it, it's up to you to make the case to the IRS with whatever documentation you have. If you don't have legal right to work in the UK then it's almost certain you will not be able to use this approach.

And to George:

If you are engaged in work activity which would oblige you to pay taxes in the UK, then you will absolutely need to have a compatible visa. You cannot enter as a visitor and then proceed to work and get paid by a British company. Doing so would put you at risk of exclusion or deportation, which would throw a major wrench into your long-term plans.

I am surprised your employer is willing to go along with this, as they have legal exposure as well.

You should first determine the standing of your spouse visa, since that has the potential to provide the easiest solution.

[Bevdeforges]

Wasn't sure if it was 330 or 360 days, and wasn't in a position to look it up when I wrote that post. Thanks for the clarification.

You know, there is a widespread misconception that expats can get around the visa requirements by having their employer "back home" pay them into a bank account back there for work they are doing while out of the country. I've run into any number of people here in France who recommend that approach to American expat trailing spouses. If you're only overseas for a year or two, you can sometimes get away with it, but it's not legal.

Don't know the UK law, but the Americans require that US residents report and pay taxes on all worldwide sources of income, and for the overseas earned income exemption what matters is where you are performing the work and where you are considered resident. Where the employer is located is almost irrelevant.
Cheers,
Bev

[twostep]

It is 183 days for German citizens. I do not know if this EU or Germany alone.

Personally - this does not look right.

[Bevdeforges]

Originally Posted by twostep

It is 183 days for German citizens. I do not know if this EU or Germany alone.

Personally - this does not look right.

What exactly is the 183 day requirement for, and is it the 183 days or something else that doesn't look right to you?

I ask because I've been told that 183 days is only a rule of thumb and one of several indicators for determining a person's "tax residence." Other rules of thumb include such things as where a person's immediate family is located, where the person owns property that could be considered their "primary residence" and where a person has their "primary center of interest" (how's THAT for vague!? ).
Cheers,
Bev

[twostep]

Source of income 183 days out of country and you fall into different income taxation and income reporting categories.

Poster is a US citizen working for a UK company with regular and anticipated physical UK presence necessary for his job functions. Entering the UK as visitor looks to me like falsifying circumstances. I do not know enough about UK law. As I said - a gut feeling. It just does not look right.

[oddball]

Originally Posted by Bevdeforges

What exactly is the 183 day requirement for, and is it the 183 days or something else that doesn't look right to you?

I ask because I've been told that 183 days is only a rule of thumb and one of several indicators for determining a person's "tax residence." Other rules of thumb include such things as where a person's immediate family is located, where the person owns property that could be considered their "primary residence" and where a person has their "primary center of interest" (how's THAT for vague!? ).
Cheers,
Bev

VERY !!!!!!!!!!! LOL

[synthia]

Find a tax attorney or an accountant that specializes in overseas accounts.

Personally, I don't know why you would owe UK taxes. If a UK employee of a big company comes to the US once a month for a business trip, I don't believe they become liable for US taxes. Tax treaty issues may become an issue here, too.

Find an expert.