Working for an American Company

Hello, I have lived here for 7 years and am a British citizen. I have worked since I have been here for local companies with all of the usual UK taxes and documentation.

I am now going to be working remotely here for an American company that I used to work for. I will be their only overseas employee. They are going to handle it as if I were working there with withholding taxes, SS, etc since I am still an American citizen.

What I am looking for is some guidance on how I handle especially HMRC items here. I have always filed a zero US tax return the last 7 years because of exempt income and the double taxation waiver. Do I just file a self assessment here every year and detail my American pay?

I may have to consult an accountant, but I thought I might see if anyone had any initial guidance. Thanks!

It's not that simple.  You can't be employed as an American through payroll as taxes are done based on country of residence, not citizenship.

You need to set yourself up as an independent contractor and bill them.  As you'll pay U.K. tax and national insurance versus US tax and social security.

Thanks! That's exactly the kind of advice I was looking for 

You need to set yourself up as an independent contractor and bill them.  As you'll pay U.K. tax and national insurance versus US tax and social security.

It's not that simple, either.

If you only have one "client" then my understanding is that you could fail the IRS multi-point test to gauge if you are effectively an employee, in which case there needs to be payroll deductions in your country of residence to keep the IRS happy. You can find the test on the IRS website. Go through the points for your situation.

Usually this means the US company runs a UK payroll for you, but you are legally responsible for the payments on behalf of the US company. It's called HMRC "direct payments scheme".

A UK accountancy firm with payroll services can set it up for you. You should check with your US accountant regarding the multi-point test I mentioned.

I have come across some evidence to indicate that the American company could hire me, report my income to IRS, but as all of the income is foreign earned, they aren't obligated to do any withholding. I would file US tax return as normal with exempt income and file UK income and NHS taxes. Does this sound right to anyone?

https://money.stackexchange.com/questions/22797/u-s-citizen-hired-in-u-s-but-working-and-resident-abroad-how-should-my-employ

Under the HMRC Direct Payments Scheme you would have PAYE in the UK and when you file your personal US return you can take advantage of the foreign earned income exclusion, double-taxation relief, etc. You wouldn't have any US tax or US SS taken out of your paycheck because you wouldn't be on a US payroll.

No such thing as "NHS taxes". Only income tax and national insurance.

One thing I never got to the bottom of is if a US company with a single UK-based employee is required by UK law to set up a UK pension scheme. All my attempts to find out failed - seems the Pensions Regulator doesn't even know. Perhaps it's something that needs to be tested in court some day... 

My advice is to cover your ass by setting one up. You can opt out of it if you don't want it or if the US company is giving you a 401k.

You would need an English/Scottish law employment contract. This would give you UK employment rights; eg maternity, paternity, paid leave, auto-enrolled pension plan and so on. The employer may have UK corporate tax issues to address as well as UK withholding tax. It may be helpful to you if you ask the employer to share with you copies of the advice they receive from their lawyers or accountants.

Thank you. I will look into Direct Payments as that sounds like the direction I need to go.

I meant National Insurance, not NHS tax of course

Under the HMRC Direct Payments Scheme you would have PAYE in the UK and when you file your personal US return you can take advantage of the foreign earned income exclusion, double-taxation relief, etc. You wouldn't have any US tax or US SS taken out of your paycheck because you wouldn't be on a US payroll.

No such thing as "NHS taxes". Only income tax and national insurance.

Yes I will do. There are only two of us in the 'company' right now and I know the owner has enquired to her payroll service about handling my situation.

It may be helpful to you if you ask the employer to share with you copies of the advice they receive from their lawyers or accountants.

So with only two of you, there is a decent chance that the company is UK resident and required to register for & pay UK corporation tax & may be required or choose to register for VAT. Does the company have a PE in the UK?