Hello
I have a few questions and was wondering whether someone could advise. .
Basically I'm trying to get a feel for what if any US tax consequences there might be for me, as a US citizen who has been a UK taxpayer for many years, if I now set up a one-man consultancy here as a UK Limited Liability Company.
Here's the situation. I've lived and worked legally in London almost 20 years now. Until recently I was a salaried employee, paying UK taxes as normal. (And yes, filing FBARS etc -- learned that lesson.) Anyway I was made redundant last year (I'm an oil and gas professional, things are rather rocky at the moment) but some clients have followed me and have commissioned some pieces of work. There could be more where that comes from.
To obtain limited liability, and some less important though still non-negligible UK tax advantages, I've been advised to set up a UK limited company for, say, £10 in founding capital, with me as the sole director and shareholder, and to pay myself a combination of salary and dividends from the profits. I would be paying UK personal tax, UK corporation tax, UK National Insurance. (I have a private healthcare policy if that matters.) The idea is to pay myself 100%, in some form or other, of the limited company's post-UK-tax income.
The LTD's bank account would of course be with a "non-hidden" standard UK high street account (which I am pretty sure would have to be disclosed in the FBAR -- no problem.)
I think I have the UK tax side in hand after seeing a professional adviser here. I've run this advice past some other Brits I know who have done the same thing, and it all seems entirely legitimate, law-abiding and sensible. So far, so good.
The thing is -- lord only knows what the US tax implications could be -- they seem to have a tripwire or landmine for everything. I fear the "unknown unknowns."
Perhaps the mere fact of being a director of a non-US company triggers something? Having paid dearly a few years ago for my ignorance of FBAR rules (despite the lack of, effectively, any underlying tax owed), I'm terrified of making an innocent misstep which triggers an Indiana Jones boulder rushing at me from some unexpected direction.
I can say that, given the oil industry climate, I do not expect my income this year to exceed what I understand to be the expat income exclusion of around $100k, although who knows, I might get lucky.
Whether it does or not
-- does, say, the fact that some (most) of the income would be dividends change things, for example, with regard to the $100k limit (or anything else for that matter?)
-- I also see there's something called a US self-employment tax, which a quick look seems to apply just to social security and medicare -- I haven't paid those in years as I am already making UK National Insurance contributions.
Sorry, bit of a tangle of questions -- basically just guessing out loud.
I guess in summary, I am trying to know
-- what US taxes, if any -- e.g. US personal income tax? US corporate tax? etc. -- I would be paying on the salary and dividends;
-- whether the US reporting requirements (beyond FBARS, which I can handle myself) are onerous and would require outside help to prepare (I'm reasonably good with numbers).
In light of the answers I could decide whether the pros of setting up a LLC here outweigh the cons (if not, then I guess I'd just charge my clients as me, not as an LLC, and treat that as normal personal income tax, yes?)
Any advice / steers would be much appreciated.
