# US/UK tax offsets



## Eating_humble_pie (Nov 5, 2014)

Hell everyone - I have a tax question. I'm considering taking a temporary/contract role in UK (have already been here for some years, and am Naturalised too), and have been advised to setup my own limited company, thus allowing me to effecting pay UK tax in the range of only 20%. Question - upon filing my US tax return (Note - my tax profile is very simple, no other sources of income, etc, etc.), will I not have to "true up" and pay the additional tax due in US which would otherwise be due to IRS had I earned these monies in the US?

Worth noting, with my past earnings in the UK, I was on a permanent role, and thus my UK tax rate was similar to the comparable US tax rate, therefore was fully offset upon filing my US tax return annually, and therefore I owed no further taxes in the US.

My concern is that any benefit of a 20% tax rate in UK would have to be handed over to the US IRS, and therefore it's not ultimately a "benefit" to me (unless I can combine with some other tax loophole which I've yet to discover)

If anyone's already been down this path, I'd appreciate your feedback. Thanks.


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## BBCWatcher (Dec 28, 2012)

You are fundamentally correct. Unless you can find a favored tax arrangement that both the U.S. and the U.K. at least somewhat respect -- probably something in the tax treaty -- then setting up your own limited company sounds like a lot of effort for not much (if any) reward.

You'll find that a lot of people outside the United States (and even some within) offer financial advice that does not take into account U.S. personhood. This may be one of those occasions.


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## Bevdeforges (Nov 16, 2007)

If you set up your own company and establish yourself as an employee of said company, you would be eligible to take the FEIE (Foreign Earned Income Exclusion), which would exclude up to $97K or so of salary from US taxation, no matter what rate you pay in the UK.

Could be worth looking into.
Cheers,
Bev


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## Eating_humble_pie (Nov 5, 2014)

Thank you!


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## Eating_humble_pie (Nov 5, 2014)

Thank you -- I'll look into this option.


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## StewartPatton (Aug 5, 2014)

You need to talk to a US tax professional. You will most likely want to elect for any limited company you set up to be disregarded as a separate entity from you for US tax purposes, and any failure to make that election would likely have bad US tax consequences.


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