Time in US "on business"

Now, in the above example, would John be subject to that other state's local state taxes and filing for so for that week he was present in that particular state at a conference?

This is apparently what can occur (at least at the time of this article). Read here.
http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/

Wow. Just wow...!

And this is precisely why I stand by my assessment of this all as being irrational!!!

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Hi nun,

I see what you are saying but I am not sure your analogy is the same. You say if a "UK resident" however I am not nor ever are a "resident" in the US. I am merely a visitor for short periods of time meeting or going to conferences with work.

Thus in my mind, an equivalent scenario would be:

John Doe is an engineer. He is a dual US and UK citizen, and works for a US company, does not own the company and is on the US payroll. One of the company's clients is located in the UK and John normally talks to that person on the phone. However, to keep up good relations, John flies over to the UK to meet this client of his company for 5 days. Obviously this is not personal holiday, he is a visitor to the UK on business and not a "resident".

In the above scenario, would you expect John to be subject to UK tax assessment as a UK citizen for those 5 days in the UK, even though he was not resident in the UK and did not receive UK funds from a UK payroll?

Further, based on some comments above about local state tax, imagine John was actually just a US citizen. HE went on an engineering conference but this was in another state. This lasted 1 week and he stayed in a hotel in that other state.

Now, in the above example, would John be subject to that other state's local state taxes and filing for so for that week he was present in that particular state at a conference?

In the absence of any exemption under either domestic law of the United Kingdom or a tax treaty John's UK source income would indeed be taxable by the United Kingdom.

The UK business would be aware of this and most probably have long ago signed up to HMRCs business visitors scheme.

Your example is not a great one. The Olympics are better, the only way the UK managed to get some of the athletes to come to the UK to participate in 2012 was for Parliament to change the law specifically to exempt their income from UK tax.

In your circumstances this normal operation of law is unlikely to cost you a penny providing that you complete Forms 2555, 1116, 8833 and any State returns and UK self-assessment returns correctly.

Guya - was that not because it can be argued that their income due to to sponsorship is directly related to their appearance so it can be followed through that this income is directly related to appearing in the UK?

In the future I think I will be requesting from my employer that I miss these trips unless essential and just dial in on the phone. I gain nothing financially  (lose out on jetlag if anything!) from these trips so I certainly now have an incentive not to go, to make my life less complicated!

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Thus in my mind, an equivalent scenario would be:

John Doe is an engineer. He is a dual US and UK citizen, and works for a US company, does not own the company and is on the US payroll. One of the company's clients is located in the UK and John normally talks to that person on the phone. However, to keep up good relations, John flies over to the UK to meet this client of his company for 5 days. Obviously this is not personal holiday, he is a visitor to the UK on business and not a "resident".

In the above scenario, would you expect John to be subject to UK tax assessment as a UK citizen for those 5 days in the UK, even though he was not resident in the UK and did not receive UK funds from a UK payroll?

I was in that situation for many years and never paid UK tax.  I was a UK/US dual citizen working for a US Mega Chemical company in the US and the particular business I worked within had its worldwide HQ in Brussels and major manufacturing sites in the UK and The Netherlands.  Consequently there were quite a few years where I would accumulate several weeks worth of time in those countries.  We were required to keep detailed time records of the time spent in the different countries and for 7 years the company's accounting firm, Deloitte & Touchce would assist in filing our taxes.  I never paid taxes to any country other than the US and I assumed this was because I was never tax resident in any of the countries I visited.

I can understand that had I been working in the UK and doing business trips to the US then it would have been different since as a USC I am always considered tax resident in the USA regardless how little I lived or worked there.

I also spent lots of time in other States on business and was not aware of the tax implications between States.  These days as a retiree I spend lots of time in other States as a traveler and am not aware of having pay any State income taxes to places I visit, sometimes for a month at a time.

I was in that situation for many years and never paid UK tax.  I was a UK/US dual citizen working for a US Mega Chemical company in the US and the particular business I worked within had its worldwide HQ in Brussels and major manufacturing sites in the UK and The Netherlands.  Consequently there were quite a few years where I would accumulate several weeks worth of time in those countries.  We were required to keep detailed time records of the time spent in the different countries and for 7 years the company's accounting firm, Deloitte & Touchce would assist in filing our taxes.  I never paid taxes to any country other than the US and I assumed this was because I was never tax resident in any of the countries I visited.

I can understand that had I been working in the UK and doing business trips to the US then it would have been different since as a USC I am always considered tax resident in the USA regardless how little I lived or worked there.

I also spent lots of time in other States on business and was not aware of the tax implications between States.  These days as a retiree I spend lots of time in other States as a traveler and am not aware of having pay any State income taxes to places I visit, sometimes for a month at a time.

The reasons you were not required to pay tax in those countries is likely to be that the relevant tax treaties exempted that income from foreign tax. 

For a US citizen in the UK carrying out work in the United States the saving clause does not permit exemption from US tax, but (State tax & NIIT aside) resourcing the income on Form 1116 achieves a similar result.

What I don't understand about 1116 is can you use this and the feie? I was under the impression it was either or.

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What I don't understand about 1116 is can you use this and the feie? I was under the impression it was either or.

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You can use FEIE up to the limit ($100,800 this year) and then you can use FTC on earned income above that. You have to use FTC on other types of income.

One thing I'm not sure of is if you can resource income from the US to the UK and then apply the FEIE to that resourced income.......or if you can only use the FTC.

Your example is not a great one. The Olympics are better, the only way the UK managed to get some of the athletes to come to the UK to participate in 2012 was for Parliament to change the law specifically to exempt their income from UK tax.

The example was mostly to show that a NRA resident in the UK would probably not have to pay US tax on income they earned while on a short business trip to the US. However, the US citizen doesn't get the same treatment and any income they get paid by a UK company while on a business trip to the US will be treated as US sourced by the IRS unless it is resourced to the UK.

Yep, working in the US for even one day could in theory create a liability to US tax, and the need to file a tax return for a non-US person.   

I've seen this in practice a few times - but of course most people just ignore it as they either don't know that this is the position, or they feel that they are paying tax in their home country and therefore won't need to pay again in the US (which if they are resident in a country with which the US has a tax treaty, is probably right). However, the IRS does still expect to have a tax return filed even where no tax is due - to make the treaty claim.   Which would mean that the non-US person would need to get an ITIN - which can be very difficult  -  so again, many people are put off by this and don't bother, rightly or wrongly.

I know of at least one large bank, on advice from one of the Big 4 accountancy firms, who is advising it's European-based staff who visit the US for business, for any amount of time, that they must file a US tax return.     Sledgehammer to crack a walnut perhaps, but technically it's almost certainly right. 

So to answer the question a little further up the thread - the IRS isn't really treating business trips for US people any differently to how it treats them for US people - as US source income, and potentially taxable without the FEIE or FTC's available. 

Yep, working in the US for even one day could in theory create a liability to US tax, and the need to file a tax return for a non-US person.

There are some circumstances where an NRA might end up with US source income because of a business trip, but most trips can be managed to avoid US tax. The income threshold is the trickiest criterion.

see p.15 of https://www.irs.gov/pub/irs-pdf/p519.pdf

Employees of foreign persons, organizations,
or offices. Income for personal services
performed in the United States as a nonresident
alien is not considered to be from U.S. sources
and is tax exempt if you meet all three of the following
conditions.
1. You perform personal services as an employee
of or under a contract with a nonresident
alien individual, foreign partnership,
or foreign corporation, not engaged
in a trade or business in the United States;
or you work for an office or place of business
maintained in a foreign country or
possession of the United States by a U.S.
corporation, a U.S. partnership, or a U.S.
citizen or resident.
2. You perform these services while you are
a nonresident alien temporarily present in
the United States for a period or periods of
not more than a total of 90 days during the
tax year.
3. Your pay for these services is not more
than $3,000.

Taking a step back, if you resource the income from US workdays and use FTC, you can end up with some excess FTC in this category. This can then be used to reduce the US tax liability on other income that is also resourced but might not be taxable in the UK. Now that the personal savings allowance has come in, interest from a US bank account would fall into this category.

Taking a step back, if you resource the income from US workdays and use FTC, you can end up with some excess FTC in this category. This can then be used to reduce the US tax liability on other income that is also resourced but might not be taxable in the UK. Now that the personal savings allowance has come in, interest from a US bank account would fall into this category.

A resourcing Form 1116 can only be used to avoid double taxation. If income has not been taxed by the UK it could not possibly be treaty resourced.

Fortunately I do not have any US bank accounts or any US assets of any description. Previous years I am filing my time actually on business in the US is only a few days and my salary was relatively  low so I think I will just take the hit and apply to my standard deductions, personally.

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Fortunately I do not have any US bank accounts or any US assets of any description. Previous years I am filing my time actually on business in the US is only a few days and my salary was relatively  low so I think I will just take the hit and apply to my standard deductions, personally.

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In which case the treaty is not required at all.