# American living in UK, working as consultant for US firm



## BumptiousQBangwhistle (Jul 25, 2011)

Hello everyone,

I'm an American with permanent visa (married to a Brit). I live in London and work for a bank in the City.

I am looking into becoming a consultant and working from home for a US firm - all for only a 40% reduction in pay! It's a long story, I hope that the pay-off will be bigger in the long run, and there are other savings.

In any case, I have no idea what to do. As a US citizen I still have to file with the IRS, of course. I assume I should create a UK company and have the US firm pay my company. Whatever tax advantages there are will be eaten away, no doubt, when I file w/ the IRS.

Does anyone have any experience doing this? With the services being delivered to a US company, would the company have to pay VAT? I've tried to understand the whole "place of supply" thing but the HMRC web site has me befuddled ("2.1 What is 'place of supply of services'? For VAT purposes, the place of supply of services is the place where a service is treated as being supplied."). I'm a programmer, and that kind of definition is akin to the comment "i++; // increment i".

I've looked some on the forums here and have found similar but not quite the same thing (e.g., thread 74705).

I would also need an accountant with experience in this. Recommendations would be greatly appreciated.

Thank you,

BQB


----------



## Bevdeforges (Nov 16, 2007)

BumptiousQBangwhistle said:


> I am looking into becoming a consultant and working from home for a US firm - all for only a 40% reduction in pay! It's a long story, I hope that the pay-off will be bigger in the long run, and there are other savings.
> 
> In any case, I have no idea what to do. As a US citizen I still have to file with the IRS, of course. I assume I should create a UK company and have the US firm pay my company. Whatever tax advantages there are will be eaten away, no doubt, when I file w/ the IRS.


OK, don't make this any more complicated than it has to be. Yes, you should set up some kind of UK business - and it depends on what sort of business it is whether you have to invoice the US company and the details about VAT. (I'm doing well to have figured this stuff out here in France - I leave it to someone with UK experience to advise you there.) There is, however, a threshold in the UK with regard to VAT. If you aren't being paid more than X, you may not have to deal with it at all.

However, don't forget that with your own UK company, you can also deduct all your own expenses (business stationery, your computer and supplies for that, etc. etc.) and you get to deduct your VAT paid only if you're charging VAT to your "customer" so it can work out to your advantage.

Take a good look at IRS publication 54, too. There is (or was) something in there to the effect that, if you are self-employed overseas, your net results can be considered the same as "salary" (at least for the earned income exclusion) as long as you can justify it as "personal service income." As a programmer, I don't think that's a problem - your business IS personal service from the start. So basically, your income will still be excludable for US tax purposes. You report it, sure, but exclude it just like you've been doing and just worry about settling up with the UK tax authorities.
Cheers,
Bev


----------



## BumptiousQBangwhistle (Jul 25, 2011)

Thanks Bev, I do tend to make things more complicated.

Does anyone know of an accountant with this type of experience? I know of several "standard" accounts, £70 - £100 a month who handle simple (UK resident, UK income) businesses. But am not sure of one that can handle the point of supply issue etc.

Thanks


----------



## Bevdeforges (Nov 16, 2007)

BumptiousQBangwhistle said:


> Thanks Bev, I do tend to make things more complicated.
> 
> Does anyone know of an accountant with this type of experience? I know of several "standard" accounts, £70 - £100 a month who handle simple (UK resident, UK income) businesses. But am not sure of one that can handle the point of supply issue etc.
> 
> Thanks


For your "point of supply" issue, I believe what you want is an accountant who is up to speed on VAT in the UK. If you are doing the actual work in the UK, then I believe you fall under the UK rules on VAT. But it's a VAT issue more than anything else.

I know that here in France, we have to get export confirmation in order to exempt a customer from VAT. With services, it depends on where the services are actually performed. 
Cheers,
Bev


----------

