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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My UK company based in london has just hired its first US

Resolved Question:

Hi ***** company based in london has just hired its first US citizen employee. He has signed the same employment contract as all the UK employees. However he will be working from the US and coming to London for 1 week every month. We have no office in the US so he will work from his home in the US. How does this work from a tax perspective. Does he have to first pay UK taxes and then US taxes or can he avoid the UK tax system and just pay US taxes from his home state?Thanks
James
Submitted: 12 days ago.
Category: Tax
Expert:  Sam replied 12 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 12 days ago.

Hi

He will be liable to tax in the UK as a first point of law as he will be paid from the UK - then when HMRC consider whether he can be awarded NT (No Tax) status - they will look at whether any of his work or duties take place in the UK - to which the answer is yes,

So although he could spnd less then 90 days in the UK per tax year -0 he will perform employment duties in the Uk and its this proportion of income that will remin haing a UK liability.

So I advsie

Alert HMRC to the fact you have engaged this employee in the normal way and operate normal PAYE against this income, then ask this employee to complete form P85 (which does lean towards employees whom have worked in the Uka nd are now leaving the UK to work abroad) but will allow the information HMRC need to establish a tax position, and if he thens ends this form with a covering letter stating that he has always lived and worked in the USA until this time and advsie them what the arrangement will be - so they can determine a UK tax position for him.

Its likely he will remin fully liable on the income throughout the year and then be awarded any non residency position against the income not earned whilst in the UK

But note that if he comes to the UK for holidays and exceeds the 90 day rule, then he will have a full UK liability on all the UK income

As far as the USA is concerned I am sure you can appreciate we are UK tax experts on the UK tax forum so he should alert the IRS of this situation and if they state he is liable in the USA the under the double taxation agreement the UK have with them they will take the UK tax suffered into account so he is only charged the once at the highest rate

Let me know if I Can assist further

Link here for form P85

https://www.gov.uk/government/publications/income-tax-leaving-the-uk-getting-your-tax-right-p85

Thanks

Sam

Customer: replied 13 hours ago.
Hi SamThanks for the detailed response. I have been on holiday apologies for the late reply. There has been a slight change since my message in that he will now be working from a leased office in New York but will still come to the UK a few times a year. Does alter anything from your message?Thanks
James
Expert:  Sam replied 9 hours ago.

HI James

Thanks for you response

No change on my reply as he is still going to be an employee not self employed -

Regards

Sam

Customer: replied 8 hours ago.
Hi SamI'm speaking to our payroll company regarding this also and they think he should pay US tax not UK tax. At present we have no working visa for him and the vast majority of his time/work will be in the US so surely he should pay the US tax in the first instance even if he has signed a UK employee contract?His time in the UK will just be for admin/internal company purposes. All his work/revenue generation will be in the US.thanks
james
Expert:  Sam replied 8 hours ago.

HI

Is he to be paid from the USA or UK - if paid from the UK then he will have a UK tax liability as raggedy advised and will have to apply for NO tax status as he will ultimately be liable to tax in the USA (but the income is taxed from its origin) so he can then either

1) under the double taxation agreement the UK has with the USA he can have the UK tax suffered offset a against the USA liability OR

2) Apply for code NT in the Uk so this income is paid ax free due to non residency and the fact that no work will be carried out in the UK and the pay tax in the USA

If you want everything to be USA based then he must be employed and paid from the USA so the UK has no involvement

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13828
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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