Planning ahead -- tax obligations for remote work in the US in 2017

It is a common misconception that treating workers as self-employed worker over-rides employment law; as Uber fond recently to their cost.
https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status

Your employer would have potential corporate tax, employment law (labor law in American English) VAT & payroll requirements if they offered you employment in the United Kingdom. 

Why do they need you to perform this work in the UK?  Cannot you continue to remain in Chicago if they cannot employ you in London.  The months ahead are after all the best time of the year to be in Chicago (I was married in Chicago, many of us would rush to move there...)

It is a common misconception that treating workers as self-employed worker over-rides employment law; as Uber fond recently to their cost.
https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status

Your employer would have potential corporate tax, employment law (labor law in American English) VAT & payroll requirements if they offered you employment in the United Kingdom. 

Why do they need you to perform this work in the UK?  Cannot you continue to remain in Chicago if they cannot employ you in London.  The months ahead are after all the best time of the year to be in Chicago (I was married in Chicago, many of us would rush to move there...)

Interesting article.

My US company does not need me to perform my job while in the UK.  They'd prefer I stay in Chicago, but allowed me to work remotely in the UK because my husband's company could not sort out a secondment or job transfer to the US for him.   Seemed at the time like a good compromise in that neither of us would have to quit our jobs and start over, though we obviously made these arrangements without fully researching feasibility. You can imagine that now having to potentially move into a contractor position is a bitter pill for me to swallow.   

Chicago is home for me and yes, the best months are just around the corner!  I'd be pretty happy to stay here a while longer, too.  Where were you married? 

The risk to your employer is huge if they fail to deal with laws in the jurisdiction where they have employees. I know this is a silly example; but imagine you were working remotely but based in North Korea. You'd know (without thinking) that you'd have obey the laws of North Korea. The UK is rather more fun than that country; but also has a huge set of laws to work through.

We were married in City Hall; 20 years ago next month ... This is the wonderful Judge who married us: http://articles.chicagotribune.com/2003-04-20/news/0304200275_1_juvenile-court-cook-county-judge-arthur-rosenblum

Interesting article.

My US company does not need me to perform my job while in the UK.  They'd prefer I stay in Chicago, but allowed me to work remotely in the UK because my husband's company could not sort out a secondment or job transfer to the US for him.   Seemed at the time like a good compromise in that neither of us would have to quit our jobs and start over, though we obviously made these arrangements without fully researching feasibility. You can imagine that now having to potentially move into a contractor position is a bitter pill for me to swallow.   

I think there might have been a bit of naivety on both side here. But the pill need not be bitter.......you can become a contractor, charge them the going rate and maybe even be a bit better off.

I think there might have been a bit of naivety on both side here. But the pill need not be bitter.......you can become a contractor, charge them the going rate and maybe even be a bit better off.

This.  You'll be fine.  Now that you know what you are dealing with, you can deal with it.   

I don't mean to hijack this thread, but I have the same scenario with my employer letting me work from U.K. to do my current type of work.  I did have to sign a new employment agreement to work as a contractor and bill for my hours.  What else must one do to switch or be considered a contractor? I assume I will be a 1099 once the switch is effective, they will be paying me in my current US account....what I don't know is if I will need to pay the state taxes, Medicare SS etc from my paychecks each month or if I need to pay at the end of the year or do contractors have to pay that quarterly or something.  I also want to make sure that if I become self employed, I guess that is the term, that I am complying with all the U.K. tax portion too.  Should I consider forming an LLC or a company to be self employed is it recommended? If anyone knows a good accountant that can help me with tax setup for both countries please let me know their info.

I don't mean to hijack this thread, but I have the same scenario with my employer letting me work from U.K. to do my current type of work.  I did have to sign a new employment agreement to work as a contractor and bill for my hours.  What else must one do to switch or be considered a contractor? I assume I will be a 1099 once the switch is effective, they will be paying me in my current US account....what I don't know is if I will need to pay the state taxes, Medicare SS etc from my paychecks each month or if I need to pay at the end of the year or do contractors have to pay that quarterly or something. 

You do not pay FICA ie Medicare and SS payroll taxes. You will bill your client (your former employer) and at the end of the year they will send you a 1099 as part of their US tax reporting. As long as you have established your US state non-residency there will be no US state tax either. You are going to have to pay UK and US income tax and UK national insurance tax.

You'll file a UK self assessment as self employed and also your US 1040 with Schedule C (make sure you don't pay any US SE tax) and use FEIE or tax credits to offset any US tax due.

I also want to make sure that if I become self employed, I guess that is the term, that I am complying with all the U.K. tax portion too.  Should I consider forming an LLC or a company to be self employed is it recommended? If anyone knows a good accountant that can help me with tax setup for both countries please let me know their info.
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Ok I think I get the 1040 with sched C need to look into the UK side...unfortunately for me I currently reside in Virginia which looking online is one of 4 stubborn states that it is difficult to establish non-residency if you get income from VA and I thought I read that VA will not allow credits if you are paying taxes to another country..have to double check that but so far sounds like a pain and unfair.

So, I asked my employer, and their response:  "The information you received regarding registration in the UK by the University is technically correct – however, our legal team has determined that we will not register in the UK at this time for various reasons. Although, this does not mean that you cannot work in the UK; it just means that since we are not registered in the UK we cannot withhold UK taxes. I do not know about being eligible for UK benefits based on this withholding, so I cannot comment on that portion. As a US Citizen, you are subject to worldwide income withholding and reporting – so we will still withhold Federal, OASDI and Medicare taxes on your income. Once you change you work location to the UK, Illinois State taxes will stop being withheld. You can claim exempt from federal taxes if you would like – but that is up to you and your accountant."

Understood that I'll need to report my UK income and pay appropriate taxes/national insurance in the UK (and similarly need to report in the US).  It's clear I'll need to work a qualified professional to get that right.  If anyone has personal recommendations in the greater London area, please PM me.

I'm still unclear as to how much risk I'd be taking on vs. that of my employer.  Given the responses so far, it seems my obligation is to get my reporting correct, and my employer is taking on all of the risk for being out of compliance with UK employment law.  (BTW, the self-employment route makes more sense to me now than when I first started this thread, though the thought of moving to self-employment three months before I have a baby isn't very appealing.)

If you are an employed worker, which you will be from everything you describe, your employer is required under law to offer you English or Scottish benefits. You may wish to take the case to an employment tribunal. If you can join a Union in the UK, you will find they will be pleased to help argue your case. These might help you: https://www.citizensadvice.org.uk/work/discrimination-at-work/what-are-the-different-types-of-discrimination/pregnancy-and-maternity-discrimination-at-work/
https://www.gov.uk/maternity-pay-leave/overview

So, I asked my employer, and their response:  "The information you received regarding registration in the UK by the University is technically correct – however, our legal team has determined that we will not register in the UK at this time for various reasons. Although, this does not mean that you cannot work in the UK; it just means that since we are not registered in the UK we cannot withhold UK taxes. I do not know about being eligible for UK benefits based on this withholding, so I cannot comment on that portion. As a US Citizen, you are subject to worldwide income withholding and reporting – so we will still withhold Federal, OASDI and Medicare taxes on your income. Once you change you work location to the UK, Illinois State taxes will stop being withheld. You can claim exempt from federal taxes if you would like – but that is up to you and your accountant."

Understood that I'll need to report my UK income and pay appropriate taxes/national insurance in the UK (and similarly need to report in the US).  It's clear I'll need to work a qualified professional to get that right.  If anyone has personal recommendations in the greater London area, please PM me.

I'm still unclear as to how much risk I'd be taking on vs. that of my employer.  Given the responses so far, it seems my obligation is to get my reporting correct, and my employer is taking on all of the risk for being out of compliance with UK employment law.  (BTW, the self-employment route makes more sense to me now than when I first started this thread, though the thought of moving to self-employment three months before I have a baby isn't very appealing.)

Your university employers probably aren't going to get into much trouble over this, but they would be breaking UK law by employing you in the UK without complying with UK employment regulations. However, you will end up with tax complications particularly when it comes to Medicare and SS withholding. Those will be taken out and I don't see how you'll get them back. You will have to pay UK National Insurance and income tax and that is usually the duty of your employer....but they say they can't do that....so what do you do, pay them yourself? If you go along with the naive attitude of the university you'll find yourself in a situation that is self contradictory and the only way you'll satisfy both the IRS and the UK is probably to pay far more tax than is necessary.

Your university is clueless in this matter and setting you up for a taxation disaster. You need to become self employed and work on contract. Remember to add overhead to your current hourly rate when you agree terms.

So, I asked my employer, and their response:  "The information you received regarding registration in the UK by the University is technically correct – however, our legal team has determined that we will not register in the UK at this time for various reasons. Although, this does not mean that you cannot work in the UK; it just means that since we are not registered in the UK we cannot withhold UK taxes."

No, it means that they cannot legally employ you as I'm sure their benefits don't comply with UK employment law......eg does your University off you a UK approved pension plan?

I'm 99% sure that Guya is a tax professional.  He's never come out and said it but after reading his responses for a few years now, I think I've sniffed him out.  I'd contact him.

I agree with Nun.  They are setting you up for disaster by saying they are going to continue to withhold medicare and social security.  That's YOUR money and you should be receiving it.  You have to pay the equivalent here.  Grossly unfair (and naughty on their side).

You can do this.  You've made huge progress just in the last week!