Billing a US company

**expat** · 26 September 2006, 07:48

Originally posted by d4005

It would be best if I could avoid having to charge them VAT, with it being a pain in the butt for them trying to recover international VAT. What should I do to avoid having to charge them VAT?

Don't register for VAT. Your Ltd Co doesn't have to register if the turnover is below the threshold. If it approaches it, start using another one.

Originally posted by d4005

edit: a quick summary of IR35 would be useful. Never heard of this before.

Is there some reason why you haven't already read the First Timers' Guide from the CUK front page? (PS that is the non-sarcastic reply).

**3ill** · 26 September 2006, 07:55

Hi, I did the exact same thing (except I'm a green card holder)

To summarise, I billed in USD, no VAT, they transferred the invoice amount to my designated US bank account which was with Bank of America (BOA) BOA are useless when it comes to international wires so what I did was set up a HSBC US account, I did this from the UK and if you're a HSBC premier customer its free. I then transferred from BOA to HSBC US, then transferring from HSBC US to your UK account is free.

That’s pretty much it, my income from my US source was below 50k GBP so I didn’t have a LTD company, just a sole trader.

One thing to keep in mind is US taxes; I'm a green card holder so I need to file US taxes every year on my worldwide income. Not sure if the same applied to H1-B holders.

**d4005** · 26 September 2006, 07:59

Originally posted by expat

Don't register for VAT. Your Ltd Co doesn't have to register if the turnover is below the threshold. If it approaches it, start using another one.

Is there some reason why you haven't already read the First Timers' Guide from the CUK front page? (PS that is the non-sarcastic reply).

Oh wow, the VAT threshold increased to 61k. Last time I contracted in the UK I think it was around 35k. I never imagined it would have increased that much. I can easily stay below that, even if it means not issuing the last few invoices of the year. I don't expect the contract to last a full 2 years so I should be safe there.

Good (rtfm) point, I hadn't even visited the CUK front page. I found a link to the forum direct from google

**d4005** · 26 September 2006, 08:12

Originally posted by 3ill

I billed in USD, no VAT, they transferred the invoice amount to my designated US bank account which was with Bank of America (BOA) BOA are useless when it comes to international wires so what I did was set up a HSBC US account, I did this from the UK and if you're a HSBC premier customer its free. I then transferred from BOA to HSBC US, then transferring from HSBC US to your UK account is free.

Nice tip, I'm also currently banking with BOA. Their email notifications are great, but the lack of bank transfer does suck big time. I guess I'm going to have to open a UK business account again (I was with Barclays last time) and I'll definitely look at HSBC knowing I can utilize their globality like that.

You ever get tempted to hold money in your US account for as long as possible to gain on the currency exchange rate? The rate (as you'll be aware) is really bad right now. I feel that if the US stock market finally gets going, then the dollar might finally rebound.

Originally posted by 3ill

That’s pretty much it, my income from my US source was below 50k GBP so I didn’t have a LTD company, just a sole trader.

So 50k GBP is the threshold? I'd have trouble there, I expect to be around 60k GBP (at current exchange rates). As I recall, sole trader is a much easier way to manage yourself, but you don't get the advantage of issuing dividends to minimize NI contris. Or have things all changed in the last decade?

Originally posted by 3ill

One thing to keep in mind is US taxes; I'm a green card holder so I need to file US taxes every year on my worldwide income. Not sure if the same applied to H1-B holders.

I don't think so, I'll officially be "let go" as an employee, which renders my H1-B invalid (although it would have expired anyway) so I'll break all tax ties with the US and start a clean tax year in the UK. Someone please feel free to tell me I'm wrong, but I'm confident I won't have to file any more US tax returns after the 2006 one.

~d

**expat** · 26 September 2006, 08:26

Originally posted by d4005

Oh wow, the VAT threshold increased to 61k. Last time I contracted in the UK I think it was around 35k. I never imagined it would have increased that much. I can easily stay below that, even if it means not issuing the last few invoices of the year. I don't expect the contract to last a full 2 years so I should be safe there.

Good (rtfm) point, I hadn't even visited the CUK front page. I found a link to the forum direct from google

OK sorry, deep linking strikes again!

Don't forget, it is the Ltd Co that registers for VAT, not the person. There is nothing to stop you having 2 Ltd Cos, and ensuring that each turns over less than the threshold. Each has (e.g.) a 6-month contract with the client, and you personally are employed by both of them. Neither is required to register for VAT.

**triboix** · 26 September 2006, 08:28

Originally posted by d4005

I haven't done anything yet (like form a limited company) and I'm looking for advice. It would be best if I could avoid having to charge them VAT, with it being a pain in the butt for them trying to recover international VAT. What should I do to avoid having to charge them VAT?

You don't have to invoice VAT if you do some work from the UK to the US.

Originally posted by d4005

I took a look in the thread where somebody asked about billing a french company but the person said they were a sole trader so that's different. Would it be best if I setup as a sole trader also? Last time I was contracting in the UK (early 90's) I seem to recall there being an income limit as sole trader. I could be totally wrong there though. My income would be around 50-60k GBP.

I suggest to operate through a limited company. It is more tax efficient for about the same administrative burden. Very easy to setup: think about a name, go to accountants (ex: SJD) that do company creation, pay and your limited is created within an hour. A bit more delicate is to open a business bank account; in your case you may want to open 2 of them, one in GBP and one in USD. But if you already have a contract, I bet that it will be much easier! Alternatively, you can open the USD one directly in the US, but I don't now much about that...

Originally posted by d4005

Would it be also ok for me to bill in dollars? I'd be issuing an invoice twice a month for the same amount in dollars, but if it's in GBP then I'd have to calculate the amount each time. What I could do I guess is issue the invoice to the client in dollars, and once the money arrives in the bank, I'd write up another invoice for that amount in GBP for accounting purposes. Strictly speaking it might break some rule, but it's not an attempt to cheat in any way so I'm not sure if it'd be frowned upon or not.

I don't think this is valid, as these will be 2 different invoices. What numbers would you put in them, for ex? I think you will need to record both the amount in USD and its counterpart in GBP that day for accounting purposes. Best is to ask to an accountant.

Originally posted by d4005

The only things that are fixed are that the client is in america and wants to be charged in dollars without VAT, the income would be 50-60k GBP and I'd be UK based. The more I want to deviate from this, the more the company would start thinking it's becoming not as easy as I'd promised.

No problems! You don't have to invoice VAT in this case, and it's not a problem of income threshold. You may even want to register to VAT so you can recover VAT on your expenses. If you can setup a USD account in the US, that will be very easy for your client.

Originally posted by d4005

Any suggestions/advice welcome

edit: a quick summary of IR35 would be useful. Never heard of this before. I won't be using an agency if that's relevant.

That's quite important, indeed. Basically, IR35 is to avoid you to structure your business to pay less taxes where your relationship with your client looks more like a employers/employee instead of a genuine commercial relation. The revenue is usually very interested in ex-employees who then work as contractors for their old employers!
Be careful about that, the contract between you and your new client/ex employer should be a genuine commercial contract.

I hope this helps a bit, but IANAL and the best advice here is to seek advice from an accountant or somebody specialized in international transactions (maybe an expatriate advisor).

**triboix** · 26 September 2006, 08:35

Originally posted by expat

OK sorry, deep linking strikes again!

Don't forget, it is the Ltd Co that registers for VAT, not the person. There is nothing to stop you having 2 Ltd Cos, and ensuring that each turns over less than the threshold. Each has (e.g.) a 6-month contract with the client, and you personally are employed by both of them. Neither is required to register for VAT.

Be careful in that case! I know that at least for corporation tax purposes, the thresholds are spread between all the "close" companies you have. Ex: if you own 3 companies, each of them has its thresholds divided by 3; for the small company rate of 19% this will bring the 300.000 pounds threshold to 100.000.

**triboix** · 26 September 2006, 08:37

Originally posted by 3ill

One thing to keep in mind is US taxes; I'm a green card holder so I need to file US taxes every year on my worldwide income. Not sure if the same applied to H1-B holders.

Damn it (tm)!
I know this was the case for US nationals, but not for green cards holders!!!
Thanks for the info, so I will never seek for a green card!
I think the threshold to pay US taxes if you are not US resident is 80.000 USD. But you still have to declare your earnings!

**3ill** · 26 September 2006, 09:17

Originally posted by triboix

Damn it (tm)!
I know this was the case for US nationals, but not for green cards holders!!!
Thanks for the info, so I will never seek for a green card!
I think the threshold to pay US taxes if you are not US resident is 80.000 USD. But you still have to declare your earnings!

Yeah.. Green Card holders are treated the same with regards to Taxes as US Citizens.

If you’re a permie and have income of less than 80,000 USD then its relatively straight forward as you can file under the foreign earned income exclusion. If you fall outside the 80k USD limit then you have to go down the tax credit route. From my understanding, the amount of tax you have paid (to IR) on your UK income goes to offset your US tax and in most cases since UK tax is greater than US tax you don’t end up paying any extra taxes on your US tax return.

I should point out however that if you own 10% or more in any LTD company then you have to file extra paperwork form 5471 which is a pain in the ass because its really only meant for CEO’s of large corporate firms.. but any contractor who has a LTD and has shares of greater than 10% in it also has to file this as well. Failing to do so results in a fine of 10k USD.

With regards to the exchange rate.. yes it sucks big time.. I always held onto my money in USD until the rates were favourable. But that depends on how much money you need in GBP at any particular time.

Billing a US company