Paying taxes if still employed by UK employer

Hi all,

Just a quick question: my husband and I are planning on moving back to the US in a year or so and my husband has provisionally arranged something with his employer here in the UK whereby when we move, he will basically work remotely for the UK company from our home in the US. Essentially nothing will change except for the fact that he will be resident in the US instead of the UK.

Does anyone know what the tax consequences will be of this?

Will his income be liable to US as well as UK taxes? If so, it seems pretty silly for him to keep the UK job, but on the other hand the job pays really well.

Any insight is greatly appreciated. Thanks!

Cheryl

Will his income be liable to US as well as UK taxes?

Yes, BUT ...... double taxation relief will be due. That is, the US tax will get reduced by the amount of the UK tax on that income, or the US tax on that income, if lower.

For example, if the UK tax is the equivalent of $5000, and the US tax on the income (prior to double taxation relief) is $6000, then in fact the US tax on the income will be $6000 - $5000 = $1000.

Second example,  if the UK tax is the equivalent of $15000, and the US tax on the income (prior to double taxation relief) is $12000, then in fact the US tax on the income will be $12000 - $12000 (capped) = $0!

Those are the general principles that will operate.

Surely once he leaves the UK he will not be liable for UK tax?


Vicky

John - sorry but I agree with Vicky but not you in this case.

The questioner & her husband will be US resident & doing all of the work in the US.  Therefore the income will be 100% US (not foreign) source, so liable to US Federal & State taxes.  There should be zero UK tax as the questioner's husband will not be UK resident & perfoming no duties in the UK.

The company may well be concerned that the husband's presence in the UK becomes a permanent establishment of the UK company within the US so may be unwilling to enter into such a deal to minimise it's own corporate tax & filing obligations.

Thanks for all the info, everyone.
We will at some point get professional advice on this - but it's good to get some feedback on what some of the initial issues are.

Guya: it's interesting what you mention about my husband's employer. He is employed by the NHS, so I would imagine they would NOT be too keen on creating a permanent establishment in the USA.

We have thought about my husband flying back every 90 days and basically just continuing to be a UK resident, if that's possible. But somehow that seems very suspicious to me, not sure why. I guess because he would be avoiding US tax (is that fraudulent?)

I would be astounded if the NHS allowed this sort of flexibility with tax and residency.

Vicky

Vicky,
I would have to agree!! But my husband works in IT, and the NHS employes quite a lot of independent IT consultants to help with the work my husband does - perhaps he can become self employed and then get payment from the NHS via this route.
Something to think about I guess!
Thanks for your thoughts..
Cheryl

Yes, that was my thinking too.

Vicky