Full time contracting for US company - where do I stand?
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    Default Full time contracting for US company - where do I stand?

    Hi,

    This is my first time 'contracting' and my first time here....apologies if I'm posting in the wrong place.

    I have just started what's essentially a full-time contract with a US software house - they have no presence in the UK / continental Europe, either physically or legally in terms of company structure or other staff

    I'm not trying to do anything fancy, I just want to pay my taxes and take advantage of whatever I can reasonably claim as expenses in terms of running myself. Am I a complicated case in tax terms? It's unlikely that I will be taking on any other contracts so essentially I'm 'employed' full time by the single US firm as a full-time remote employee.

    Any tips would be much appreciated.

    Thanks,

    Stephen

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    Whether or not you're "employed" depends on the terms of your contract. If you're employed, you'll need to set-up a PAYE direct scheme with HMRC for PAYE and Employee's NI (DPNI) because your employer has no UK tax presence. No Employer's NI is due. Otherwise, you can choose to operate through a U.K. umbrella, assuming the contract is within U.K. jurisdiction and governing law (unlikely a large US company would agree to that) or you can form a Ltd.

    If you form a Ltd, the tax situation is not substantially different than a contract for a U.K. client, although the supply will be outside of the scope of VAT (most likely). Whether the contract is inside IR35 will depend on the working relationship (get your contract and proposed working practices reviewed), but you seem to view it as one of employment. YourCo and you will pay tax in the U.K. Note that you cannot do any productive work in the U.S. unless you're a U.S. citizen or have an appropriate employment visa. If you're a U.S. citizen, your personal tax situation is much more complicated too. Beyond that, you'll need an accountant and PI insurance for U.S. jurisdiction and governing law (if applicable), which is much more expensive.

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    Marvellous, that's got me started, thanks James.

    Regarding your comment: "Whether or not you're "employed" depends on the terms of your contract." - if we assume I am a "contractor" - i.e; I bill the US company for services each month rather than a "regular employee" - does that change my position at all? Presumably as a "contractor" I should still setup a scheme with HMRC for Employee's NI but then handle tax as a return at the end of the year?

    Or would it be easier (for me!) to get a standard "you are an employee" contract from the US company - they're pretty flexible with most things.

    Thanks again,

    Stephen

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    Quote Originally Posted by jamesbrown View Post
    Whether or not you're "employed" depends on the terms of your contract. If you're employed, you'll need to set-up a PAYE direct scheme with HMRC for PAYE and Employee's NI (DPNI) because your employer has no UK tax presence. No Employer's NI is due. Otherwise, you can choose to operate through a U.K. umbrella, assuming the contract is within U.K. jurisdiction and governing law (unlikely a large US company would agree to that) or you can form a Ltd.

    If you form a Ltd, the tax situation is not substantially different than a contract for a U.K. client, although the supply will be outside of the scope of VAT (most likely). Whether the contract is inside IR35 will depend on the working relationship (get your contract and proposed working practices reviewed), but you seem to view it as one of employment. YourCo and you will pay tax in the U.K. Note that you cannot do any productive work in the U.S. unless you're a U.S. citizen or have an appropriate employment visa. If you're a U.S. citizen, your personal tax situation is much more complicated too. Beyond that, you'll need an accountant and PI insurance for U.S. jurisdiction and governing law (if applicable), which is much more expensive.

    Thanks James & apologies if this reply comes through twice, the first time it didn't seem to appear.

    Assuming I'm a "contractor" rather than a formal employee of the US company, sounds like I should setup "a PAYE direct scheme with HMRC" to handle my NI. But would I handle tax separately at the end of the year by way of a return / an accountant?

    Thanks again,

    Stephen

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    Quote Originally Posted by briangriffin View Post
    Thanks James & apologies if this reply comes through twice, the first time it didn't seem to appear.

    Assuming I'm a "contractor" rather than a formal employee of the US company, sounds like I should setup "a PAYE direct scheme with HMRC" to handle my NI. But would I handle tax separately at the end of the year by way of a return / an accountant?

    Thanks again,

    Stephen
    If you are an employee you can set yourself up as their employee but there will be paperwork from HMRC that in all likelihood you would have to deal with.

    I suspect the easier solution all round is for you to be a contractor, create a limited company for your own use and for that limited company to bill them directly
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    Quote Originally Posted by briangriffin View Post
    Thanks James & apologies if this reply comes through twice, the first time it didn't seem to appear.

    Assuming I'm a "contractor" rather than a formal employee of the US company, sounds like I should setup "a PAYE direct scheme with HMRC" to handle my NI. But would I handle tax separately at the end of the year by way of a return / an accountant?

    Thanks again,

    Stephen
    If you're a contractor and you choose to operate through a U.K. Ltd then, yes, your company will need to operate PAYE/NI on any salary payments. However, the first, and most important, thing you need to understand, if you choose to operate through a U.K. Ltd., is that you are your Ltd. are not the same things, legally. A PAYE direct (DPNI) scheme is intended to allow employees of foreign companies, without a U.K. tax presence, to operate PAYE/NI themselves in the absence of a UK employer. If you're operating through a U.K. limited, then the responsibility lies with YourCo to operate PAYE/NI correctly for anyone that receives a salary (and, eventually, you as a director if you screw-up). This will not be a DPNI scheme and YourCo will also need to operate Employer's NI appropriately, depending on status.

    For practical purposes, if you're operating through a UK Ltd., your U.K. Ltd will be your "employer" (regardless of whether you have a formal contract of employment with YourCo). If you go down this route, you should seek an accountant. If you're a U.S. citizen or are otherwise tax resident in the U.S., you should seek a tax professional with cross-border experience.

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    Quote Originally Posted by jamesbrown View Post
    If you're a contractor and you choose to operate through a U.K. Ltd then, yes, your company will need to operate PAYE/NI on any salary payments. However, the first, and most important, thing you need to understand, if you choose to operate through a U.K. Ltd., is that you are your Ltd. are not the same things, legally. A PAYE direct (DPNI) scheme is intended to allow employees of foreign companies, without a U.K. tax presence, to operate PAYE/NI themselves in the absence of a UK employer. If you're operating through a U.K. limited, then the responsibility lies with YourCo to operate PAYE/NI correctly for anyone that receives a salary (and, eventually, you as a director if you screw-up). This will not be a DPNI scheme and YourCo will also need to operate Employer's NI appropriately, depending on status.

    For practical purposes, if you're operating through a UK Ltd., your U.K. Ltd will be your "employer" (regardless of whether you have a formal contract of employment with YourCo). If you go down this route, you should seek an accountant. If you're a U.S. citizen or are otherwise tax resident in the U.S., you should seek a tax professional with cross-border experience.
    I'm a UK citizen / tax payer btw.

    Having spent a few days mulling this over, my current thinking is: Not to use a Ltd Co. but simply be an individual personal entity and go down the DPNI route. However as my sole means of employment will come from the one source (the US company with no UK/ European presence), will IR35 come into this at all? I've done some reading and don't imagine it could, but...

    Assuming I go down this route of 'self employed not through a Ltd. Co.' I presume I can still claim reasonable expenses against tax? I work from home much of the time and as such rely on a proportion of the house itself, its electricity, broadband, phone etc.

    Thanks again,

    Stephen

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    Quote Originally Posted by briangriffin View Post
    Not to use a Ltd Co. but simply be an individual personal entity and go down the DPNI route. However as my sole means of employment will come from the one source (the US company with no UK/ European presence), will IR35 come into this at all?

    If you are not operating through a Ltd then IR35 cannot possibly apply.

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    Quote Originally Posted by SuperLooper View Post
    If you are not operating through a Ltd then IR35 cannot possibly apply.
    Many thanks - that's cleared up my concern / added to my understanding!

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