Taxes in the US

[Hogan]

If someone is living in the US permanently, but not working there, and has income based in the UK - do they have to pay US taxes on this? Or just the UK ones? Or (eek) both?

[tim123]

If someone is living in the US permanently, but not working there, and has income based in the UK - do they have to pay US taxes on this? Or just the UK ones? Or (eek) both?

yes (both)

tim

[Hogan]

Thanks Tim !

So you get shafted basically ...

Are there any 'workarounds' to minimise the tax take from the US side ??

[sli_gryn]

i'm trying to sort out a contract working in the US and the structure i'm exploring is that i'm not re-locating to the US permanently, just for the duration of the contract. that being the case, the agency pays my UK company, and living in the US is nearly all expensed. as far as the US is concerned, i pay taxes in the UK as an employee of a UK company on "temporary" assignment to the US.

not sure of how kosher this whole arrangement is, but so far, i've had a couple of accountants agree "in principal"

anyone have any thoughts?

[tim123]

Thanks Tim !

So you get shafted basically ...

Are there any 'workarounds' to minimise the tax take from the US side ??

When I said both I didn't mean one plus the other. What I meant is that you will (probably) be liable to both, but that one will offset the other leaving you with a total tax take equal to whichever is the higher.

As the US tax is lower than the UK one you need to restructure the income so that you aviod the UK tax if this is possible.

How is the UK income generated?

tim

[Hogan]

Hi Tim - the income is going to be fairly irregular, in the form of 'royalties' for example.

The money doesn't necessarily have to be destined to a UK business (there's nothing currently in place to handle this - so just trying to research it) - just trying to figure out what was the most tax efficient way to use this income ...

[Not So Wise]

Talk to specialist international tax adviser, depending on your current circumstances and future plans (aka does the money need to enter the UK at all at any time ) there are multitudes of options open to you.
At worst you can end up paying the rate of the country with the highest tax rate (UK) , at best you could end up only paying a faction of that

[ASB]

At worst you can end up paying the rate of the country with the highest tax rate (UK) , at best you could end up only paying a faction of that

The worst is a lot worse than that (but maybe only for US nationals). Some info on the UK-US DTA can be found here: http://www.hmrc.gov.uk/bulletins/tbse6.pdf

A friend (US national, UK resident) had to pay (reasonably) UK taxes, also he had to pay some limited US taxes (federal taxes if I recall). He got no relief for the latter (but might now the treaty has been revised).

[tim123]

The worst is a lot worse than that (but maybe only for US nationals). Some info on the UK-US DTA can be found here: http://www.hmrc.gov.uk/bulletins/tbse6.pdf

A friend (US national, UK resident) had to pay (reasonably) UK taxes, also he had to pay some limited US taxes (federal taxes if I recall). He got no relief for the latter (but might now the treaty has been revised).

US nationals have to continue to pay US taxes even if residing overseas.

Only federal taxes, not state taxes need to be paid and you only pay if you earn over about 100K.

HTH

tim

[Hogan]

Thanks chaps! Some very useful input there :-)