Author Topic: Working from home - Scotland.  (Read 195 times)

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Offline MJGraton

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Working from home - Scotland.
« on: March 05, 2017, 07:48:13 PM »
So I'm working from home for a US company while my wife studies here in Scotland. I am a contractor writing some software. I've been working for them since late October (we arrived in Scotland in September). My wife is not earning income, but working in an internship once per week.

This will be our first time filing a UK return. I have registered as a sole trader in the UK. From what I understand, we pay the UK taxes and then send some extra documentation with our US return to exempt us from paying social security (as we're on the national health plan here) and a document to include our foreign tax credit.

Since the tax year ends 5 April in the UK, but we need to file by the 18th April for the USA, will that be enough time to figure out our foreign tax credit? Should we file for an extension on our taxes and pay the accrued interest?

Offline discly

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Re: Working from home - Scotland.
« Reply #1 on: March 05, 2017, 08:34:33 PM »
I am not sure that you can avoid US self-employment tax if you are in the U.K. only temporarily.  You should review the totalization agreement.

You likely should compute your foreign tax credits based on the dates you paid them. Therefore, the April 5 year end should not impact your foreign tax credits.

You likely get an automatic extension until June 15th. You can request more if needed.

Offline MJGraton

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Re: Working from home - Scotland.
« Reply #2 on: March 06, 2017, 08:51:43 PM »
Thanks discly,

I cannot avoid US self-employment tax. I am just looking for advice from someone who has filed in a similar situation; wanted to know if they found they needed an extension or not.

I will be filing for a change of address with the IRS tomorrow. Hopefully that means we will be allowed an automatic extension because our address will be abroad.

We haven't paid any foreign tax yet, but since the tax years are different between the USA and the UK it makes for an awkward situation since we will be paying taxes to both countries, and we need to let the USA know about our Foreign Tax Credit.

Offline guya

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Re: Working from home - Scotland.
« Reply #3 on: March 09, 2017, 08:32:26 PM »
Thanks discly,

I cannot avoid US self-employment tax. I am just looking for advice from someone who has filed in a similar situation; wanted to know if they found they needed an extension or not.

I will be filing for a change of address with the IRS tomorrow. Hopefully that means we will be allowed an automatic extension because our address will be abroad.

We haven't paid any foreign tax yet, but since the tax years are different between the USA and the UK it makes for an awkward situation since we will be paying taxes to both countries, and we need to let the USA know about our Foreign Tax Credit.
Filing a change of address form has nothing to do with an extension. If you chose not to pay any UK tax during the 2016 calendar year, you have no foreign tax credit to claim on your 2016 US return.

There is nothing to stop you filing an amended return next year to carry back any excess foreign tax credits from your 2017 US income tax return.

This year, remember to pay HMRC by midnight on 31 December.

Being entitled to use the NHS has nothing to do with US or UK social security or self-employment taxes.