Spouse (Tier 2 dependent) working for American company in UK?

Hi all!

I am a US citizen (currently in the US) and I recently accepted a position with a UK company. My wife and I are in the midst of the visa process while trying to figure out whether or not she can keep her work-from-home job with an American company. I will be on a tier 2 general visa and she will be on a dependent visa, so I don't think there are any concerns with her right to work in the UK.

From my research, I understand that she would need to file taxes in the UK and the US, but we have two major questions:

1) From her American employer's perspective, what do they need to do to accommodate her move abroad? I'm assuming they would continue withholding federal taxes just like normal. Her company is very leery about having to do anything special for this arrangement and we're worried that they will simply fire her if it becomes administratively difficult.

2) Since we we will no longer be residents of a state (currently living in Ohio), would we allow her employer to continue withholding for Ohio and then we would just file Ohio's state tax return to show no tax liability (getting a full refund)? Would her employer be able to not withhold for a state at all? Again, is there anything different or extra that her employer needs to do versus what they're doing now? We have parents in two other states (Michigan and Georgia) so we have the opportunity to set up a mailing address in those states if that would somehow make this easier.

Any advice is appreciated. As I mentioned, we are trying to find a way for her to keep her work-from-home job without causing problems for her employer.

Thank you so much!
We're looking forward to joining the rest of you in the UK!

Robert.

(I apologize if these questions have been asked before...I couldn't find them in my searches.)

Your wife would need to have the UK as her tax 'home'.  She would then be self-employed in the UK and file tax with HMRC first.  Then file US taxes and take either FEIE or Tax Credits.  To do this, should would be a contractor for her current employer and bill for her time.

Bigger and better tax experts will be along.  But basically she can't simply continue to work for her current employer and have them take the taxes out and have it be legal.  Sorry that it's not better news!

Your wife is likely to be an employee Her employer will want advice on their own exposure to UK corporate tax and on UK employment law issues; especially because employment law throughout the UK is rather more generous to the employee than in the United States. There could also be PAYE withholding tax issues. Your wife's employer would want to pay for the advice to protect them. 

Can I piggy back my question, which is somewhat similar on this one? My wife works from home in two ways: on one she gets a W2 and is an employee, in the other, she has the company pay our S Corporation, from which she draws a salary. I had assumed it will be easier for her to continue the S Corp work than the W2 work (and we'd perhaps try to get the staffing companies to pay the S Corp instead of seeing her as an employee). But is that wrong? If all that income is in $ and goes only into US banks, would that income still be taxable in the UK?

The basics here are if you are doing work in the UK then you are liable to UK tax first and you must pay HMRC and the get a tax credit or use FEIE on you US taxes.

The idea of someone working from a UK home for a US company and getting a W2 is just not right and also getting paid from an S-corp is equally complex.

FICA. Medicare, NI, company and income taxes are going to be issues here......you need to eliminate FICA and medicare, understand that your primary tax authority is the UK if you are a UK tax resident and with that in mind still comply with your US tax obligations as a US citizen. That can be complicated, but when you add an S-Corp too then you are digging a deep whole. You need to organize your personal and company taxes and finances appropriately for your cross border situation.

The S-Corp would be UK resident and subject to UK corporate tax on worldwide profits. If it pays a salary, this would be subject to PAYE tax & NIC withholding. The rate of tax on its profits will be somewhere close to 80% to 90% once US tax, social security, UK CT & IT & NIC are calculated...and then there's VAT and extra accounting costs. It would be a very unconventional structure.