Contracting in the UK - umbrella company and US tax implications

I am interviewing for a job which would be on a contractor basis. I'd either have to create a UK limited company or use an umbrella company for payments, taxes, etc. for the UK.

I will not go the Ltd route, as that would make me self employed and a real pain for US taxes.

Would using an umbrella company to process my payments, pay the UK taxes, etc. also make me self employed and cause US tax issues? I've read differing opinions on whether using an umbrella company makes me self employed.

Thanks

This is my new favorite website
Might help you ;-)

http://www.taxationweb.co.uk/forum/best-solution-for-a-uk-citizen-on-contract-in-ireland-t31578.html?hilit=umberella%20company#p112176

Thanks Chilly

Good site, thanks for the info. It doesn't really address my particular issue (what that guy was wanting to do is quite dodgy from what I understand - and they've eliminated most of these offshore umbrellas).

I'm mostly worried about the implications of this for US taxes.

A limited company makes you self employed?


Oopsie *eyes shift to past tax returns*

Are you absolutely sure? Isn't it the same as incorporation in the US? Any links would be REALLY appreciated as I've started a new company for my retail operation rather than go sole-trader for that very reason!

Could you make someone else the director and just have them employ you?

I was an IT contractor through a limited company for 20 years or so and found it much better than an umbrella company as you have much more control over your own money.



I am seriously *this* close to renouncing my citizenship....

How complicated does it make it really? I'm asking because I've recently had a chance to do some work outside of my "regular" job, and DH suggested I register as a sole trader to sort out the tax here.  Will it make the taxes for next year for the US just impossible? It won't be a lot of money (less than £5000 for the year I think, unless it takes off in some sort of fairytale way), if that matters.

Holy hell, I've just looked at Wikipedia:

Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally.

http://en.wikipedia.org/wiki/Self-employment

I am filing self employed for the first time and it SUCKS....

I do recommend doing this though as this will be attached to all my Tax Returns
http://www.ssa.gov/international/agreements_overview.html
If you are in the UK you apply for a certificate of coverage

and it says
A self-employed U.S. citizen or resident must attach a photocopy of the foreign certificate to his U.S. tax return each year as proof of the U.S. exemption from self-employment taxes. In accordance with Revenue Procedure 84-54, the foreign certificate serves as proof of the exemption from U.S. Social Security taxes for the period shown on the certificate.

I am registered as self employed in the UK and this is the main reason I got the certificate.
If you need more info - ask ;-)

Oooh, thanks for that. Where did you get the "certificate of coverage" is it a form I need to request or something I'll get automatically when I register as a sole trader?

When you say "sucks" is that because it's more complicated or because it's more expensive??



And I want to "opt out" of the US SS, not the UK, which is where I intend to permanently reside.

Note: you have to scroll down that link a little to get to the bit where you opt out of the US S/S system.

When you say "sucks" is that because it's more complicated or because it's more expensive??

BOTH!

Oooh, thanks for that. Where did you get the "certificate of coverage" is it a form I need to request or something I'll get automatically when I register as a sole trader?

Here is what I sent and to where:


March 26th 2010

To whom it may concern,

I am requesting a certificate of coverage from the UK per the SSA website, “If you are self-employed and would normally have to pay Social Security taxes to both the U.S. and the U.K. systems, you can establish your exemption from one of the taxes by writing to” HMRC with the required information below.

The information requested:
Full name:             
Date and place of birth:         
Citizenship:             
Country of permanent residence:   
U.K. Social Security number:       
Nature of self-employment activity:    
Dates of Activity:         
Name and address of your trade or business in both countries.

UK Address:

   
US Address – only for tax purposes as I reside fully in the UK


Thank you for your quick response and I look forward to being able to be set up legally as a self employed person to ensure the correct taxes are paid to the correct country.



Mailed to:
HM Revenue & Customs
Charity, Assets & Residence Residency
Rooms BP 1301
Bamburgh House
Benton Park View
Newcastle upon Tyne NE98 1ZZ
ENGLAND

Am I going to end up owing them money? I never have when filing exactly the same income as "employed" which, in the UK, I am.

If I do, then I'm burning my f'ing passport. I won't put up with that.



Cheers for the info, I'll send it off today.

Since my income was solely a 1099 from the US I did it on turbo tax for fun with out being in the UK and I would have owed roughly 2300K but I got my mortgage interest deduction ect...
My understanding is I wont pay any once I do it correctly since I have my certificate to cover my self employment taxes since I am liable to pay here in the UK.

More answers from the IRS - Once I get a handle on this years I will know what I am doing going forward :-)
http://www.irs.gov/businesses/small/international/article/0,,id=97160,00.html

I am interviewing for a job which would be on a contractor basis. I'd either have to create a UK limited company or use an umbrella company for payments, taxes, etc. for the UK.

I will not go the Ltd route, as that would make me self employed and a real pain for US taxes.

Would using an umbrella company to process my payments, pay the UK taxes, etc. also make me self employed and cause US tax issues? I've read differing opinions on whether using an umbrella company makes me self employed.

Thanks

After contacting my husband in a panic, he's had a quick chat with a US/UK tax adviser and, apparently, a limited company doesn't necessarily mean you'd be deemed self employed by US standards.

So, all I can suggest is you seek advice from an expert (as I intend to do next week) before you make any decisions.

Since my income was solely a 1099 from the US I did it on turbo tax for fun with out being in the UK and I would have owed roughly 2300K but I got my mortgage interest deduction ect...
My understanding is I wont pay any once I do it correctly since I have my certificate to cover my self employment taxes since I am liable to pay here in the UK.

More answers from the IRS - Once I get a handle on this years I will know what I am doing going forward :-)
http://www.irs.gov/businesses/small/international/article/0,,id=97160,00.html

Okay, good, so I'll add that to the to-do list.

Thanks for all of your info! Lots to take  in on this, it doesn't seem to be completely clear cut after all...