Need Advice Re: Paid in US while Living in UK

Hi All,

I need some advice to understand just how complex my tax situation could become. I am a contractor ( working for contractor A) that is working for another contractor (contractor B) that is working for a very large, global software company - contractor A pays my salary. I was hired and working for the software company in Redmond, Washington. After my OH was offered a job back in the UK, we decided to move all of our belongings to Kentucky so we could leave stuff behind at my mother's home. Currently I am still working remotely from my mother's in KY, so I can do all the last logisitics of our move (hubby is already in Scotland).

The manager of the team I am supporting at the global software company has asked me to continue to work and support the team once I am in Scotland. To this company, international borders really don't mean a thing. Contractor B (also a multi-national company) is trying to look into my being hired by another local contractor in Scotland so I can be paid in the UK and all that entails. However, they can't dictate to a contractor to hire me.

So, the only other option is to continue having me work for Contractor A, and be paid into my US bank account. What kind of tax hell would this create for me, since I would be living in the UK and paid into a US account? What do I need to do to make sure I stay above board with UK tax law and US tax law? How much is this going to cost us at tax time for someone to do our taxes?! I know this is doable, but I am very concerned with getting slapped with a lot of taxes by both countries!

I don't even know where to begin to research this, so any links would be helpful!

TIA,
Jamie

Income tax won't be your biggest issue, I bet payroll taxes will be the most difficult to deal with.

As a US citizen you'll have to pay US tax wherever you live. As you are performing the work in the UK you will also have to pay UK taxes on the income you earn. If you are working for a US contractor from the UK things could get complicated as I bet they will deduct US tax and FICA. The FICA should not be deducted because you are resident in the UK and you will have to pay UK taxes and national insurance.

The better solution would be to work or a UK contractor and have the payroll departments work out all the details or you could register as self employed and just invoice the US company for your services and then pay UK NI and taxes out of that and at the end of the year do your US taxes and either claim a foreign tax credit of FEIE.

This sounds great - you get all of the benefits of Scottish employment law - so your Redmond based employer (currently withholding KY state taxes) will be required to give you a Scottish employment contract with all of the extra benefits that are not traditional in Redmond. Has the company taken advice?

If only they would provide a new contract that included all the benefits of Scottish employment laws. I get the feeling that this wouldn't be the case. I would still be getting paid my existing hourly rate, and there wouldn't be any additional benefits given. For example, I currently get no paid time off whatsoever - not even national holidays - and I don't think that would change if I simply kept working for them remotely. The 2 contracting companies I work for are researching this, so I don't know what/where advice they are getting.

My manager (from contractor B) approached me today about simply paying me into my existing US bank account. I told her that I'm open to that, but it's not ideal since it would open me up to all kinds of tax implications with HMRC. The thing is though, I don't want to push back too hard and make the whole thing appear too difficult, since I'd really like to keep working remotely so I can still have a job once I arrive in the UK...But OTOH, I don't want to get screwed over by taxes...wish this was simpler!

So if I do this, either my contractor A payroll dept has to iron out the details of not deducting FICA and other taxes..or I have to register as self-employed in the UK and send them an invoice of my hours.

I assume in the self-employment situation, that if my gross hours equals to $2000, that the US payroll department would not deduct anything from that $2k, and then I have to work out the tax details on the UK side? How heavy are taxes levied on the self-employed in the UK? i.e. in the US, the self-employed have to pay the full amount of SS payments. Does something like that happen in the UK too? Would I see my $2k drop down to $1k after UK taxes?

The burden on the self employed is nowhere near what it is in the US.

You could also use an umbrella company if you decide to freelance, there are a few different optionsmfor that sort of thing. The company then handles your taxes & expenses. Our experiences with one have been very good so far!

Some reading, with many answers:

http://www.hmrc.gov.uk/working/intro/selfemployed.htm

It does not sound as if you will be self-employed at all; so the employer has no choice but to abide to Scottish law.

You may want to try the status indicator tool:

http://www.hmrc.gov.uk/employment-status/

If only they would provide a new contract that included all the benefits of Scottish employment laws. I get the feeling that this wouldn't be the case. I would still be getting paid my existing hourly rate, and there wouldn't be any additional benefits given. For example, I currently get no paid time off whatsoever - not even national holidays - and I don't think that would change if I simply kept working for them remotely. The 2 contracting companies I work for are researching this, so I don't know what/where advice they are getting.

My manager (from contractor B) approached me today about simply paying me into my existing US bank account. I told her that I'm open to that, but it's not ideal since it would open me up to all kinds of tax implications with HMRC. The thing is though, I don't want to push back too hard and make the whole thing appear too difficult, since I'd really like to keep working remotely so I can still have a job once I arrive in the UK...But OTOH, I don't want to get screwed over by taxes...wish this was simpler!

So if I do this, either my contractor A payroll dept has to iron out the details of not deducting FICA and other taxes..or I have to register as self-employed in the UK and send them an invoice of my hours.

I assume in the self-employment situation, that if my gross hours equals to $2000, that the US payroll department would not deduct anything from that $2k, and then I have to work out the tax details on the UK side? How heavy are taxes levied on the self-employed in the UK? i.e. in the US, the self-employed have to pay the full amount of SS payments. Does something like that happen in the UK too? Would I see my $2k drop down to $1k after UK taxes?

As you are working in Scotland your employer must abide by the local employment rules, so paid vacation, holidays etc etc......it isn't a choice.

If you became self employed you'd have to work out an appropriate rate for your employment. This would be significantly higher than your salary to account for costs, taxes, and things like national insurance.

Are you self-employed now? From what you've posted, I'm not sure, but it seems that if you are, you will continue in that role unless you come to another arrangement.

No, I'm not self-employed now. I'm considered an employee of Contractor A, and they have contracted me to work for Contractor B, and Contractor B has this project that I'm supporting with the global software company. Basically I think that makes me a subcontractor to the software company. I've never been a contractor before this, so I'm not sure if I'm using the terminology.

Thanks for the links. I'll give them a read over the weekend to better understand what kind of position this puts me in.