Working remotely in UK for a US company on a spousal visa - Taxation

My wife arrived in the UK in June on spousal visa.

She works for US non-profit employer who has told her that she needs to be transferred to their UK office and be paid through them (at a lower salary) because she is no longer a US resident.

She has always worked for them remotely, and is continuing to do so in the UK whilst their HR and legal team deal with the approval of her request to be transferred to their UK office. The problem is they are taking ages to deal with this.

Her salary is still going into her US bank account and she is paying tax at source.

We'd be  grateful for some advice on how this will be treated when it comes to filing her US and UK tax returns. Presumably she has to declare the income paid into her US bank account when completing her UK tax return, but will the tax she has paid (at source) in the US be offset against her UK tax liability for that same income?

Many thanks

Our daughter is in exactly the same situation having moved here in November last year, and is still working for her US firm now while they try to sort out paying her out of the UK.

As a UK resident she has to pay UK tax on her worldwide income and as a US citizen she also has to pay tax on her worldwide income but the UK-US tax treaty states that the UK is the primary taxation authority and tax credits will avoid double taxation.  So, when she filed her US taxes for 2022 she claimed an accrued foreign tax credit for the UK taxes she will pay on her US income in November and December, 2022.  She will do the same for the current 2023 tax year when she files her US return next year. She will be filing her UK return for 2022 later this year when she know exactly how much UK tax is to be paid. The difference between accrued tax she claimed and the actual tax will be reconciled on her US 2023 return.

 

The rate of pay is nothing to do with tax.  The employer has a UK entity. That entity is required to withhold tax under PAYE. This is not optional. In practice, the employer will want to recover the US tax withheld when it was not required and make payments to HMRC for PAYE tax that they owe. The employer needs to sort this out, ideally during this calendar year.  The employer may wish to take professional advice and set out in writing to the employee how they plan to rectify this issue.

This issue is very different from most remote workers, where there is no PE in the UK.

Our daughter is in exactly the same situation having moved here in November last year, and is still working for her US firm now while they try to sort out paying her out of the UK.

As a UK resident she has to pay UK tax on her worldwide income and as a US citizen she also has to pay tax on her worldwide income but the UK-US tax treaty states that the UK is the primary taxation authority and tax credits will avoid double taxation.  So, when she filed her US taxes for 2022 she claimed an accrued foreign tax credit for the UK taxes she will pay on her US income in November and December, 2022.  She will do the same for the current 2023 tax year when she files her US return next year. She will be filing her UK return for 2022 later this year when she know exactly how much UK tax is to be paid. The difference between accrued tax she claimed and the actual tax will be reconciled on her US 2023 return.

Thanks. That's very helpful. She has a tax advisor who prepares her US tax returns who has told her he has international clients and so could still help her with her return even though she is now in the UK. But I wonder if it would be better to employ a UK tax advisor to do both her US and UK tax returns? What do you think?

The rate of pay is nothing to do with tax.  The employer has a UK entity. That entity is required to withhold tax under PAYE. This is not optional. In practice, the employer will want to recover the US tax withheld when it was not required and make payments to HMRC for PAYE tax that they owe. The employer needs to sort this out, ideally during this calendar year.  The employer may wish to take professional advice and set out in writing to the employee how they plan to rectify this issue.

This issue is very different from most remote workers, where there is no PE in the UK.

Thanks very much for the reply. Yes, I can see the need for the employer to resolve this before it gets messy.

Thanks. That's very helpful. She has a tax advisor who prepares her US tax returns who has told her he has international clients and so could still help her with her return even though she is now in the UK. But I wonder if it would be better to employ a UK tax advisor to do both her US and UK tax returns? What do you think?

My wife and I use a dual qualified tax advisor and I don’t think it matters if the person or their firm is US or UK based as long as they are qualified to do both.

My wife and I use a dual qualified tax advisor and I don’t think it matters if the person or their firm is US or UK based as long as they are qualified to do both.

Thanks again.