# US Citizen Working from UK as Independent Contractor



## mcdonalds1234 (3 mo ago)

Hello! I am a US citizen living in the UK on a marriage visa. I was recently offered a job as an independent contractor for a US based company. I'm wondering:

Do I have to pay taxes in the US AND UK?
Do I need any type of business license to work from my home in the UK?
How do I file taxes in the UK?
I've tried researching, but I'm very overwhelmed and confused. Any advice would be greatly appreciated!


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## Moulard (Feb 3, 2017)

As a US citizen you will always have to file US tax returns reporting your global income.

You will be able to use either the Foreign Earned Income Exclusion or claim tax credits for UK taxes paid on the income.

If you choose to operate as if self employed, to avoid US Self Employment taxes you will need a certificate of coverage

IRS Pub 54 is a good place to start



https://www.irs.gov/pub/irs-pdf/p54.pdf



and on social security taxes and the totalisation agreement between the UK and US



https://www.ssa.gov/pubs/EN-05-10199.pdf


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## Bevdeforges (Nov 16, 2007)

And just a word of advice here: be very very sure that your potential employer is NOT planning on putting you on their US company payroll. That would mean that you are paying all the same old taxes and withholdings as someone who lives down the street from the employer and so is entitled to the company health insurance, US Social Security (i.e. the "Self Employment tax") and other "benefits." Far too many people I know have agreed to a regular employment situation and then found out that it is next to impossible to get your withheld taxes refunded to you (some states are particularly "difficult" about this), to get Social Security deductions refunded, and that you get in trouble for not contributing to the local (in your case UK) social insurance and tax system.

Look into either setting yourself up as "self-employed" (which means that you will be billing the US company for your work, and paying your own UK taxes and social insurances as a "self employed" individual) or working through a portage company (who basically takes on the whole payroll side of your "job", for a portion of what you are being paid). You may even have to charge your US employer VAT (which in many countries is charged on services based on where the work was done, not where the benefits of the service were "received"). 

A far better solution would be to have your employer pay you from their UK payroll (assuming they have an office or subsidiary in the UK) because those are already set up to handle the necessary taxes and "benefits."


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## Moulard (Feb 3, 2017)

I agree with Bev that you should avoid just ending up as an employee, however if you have lived in the UK for long enough to be eligible for the foreign earned income exclusion you can actually apply for an exemption from federal income tax withholding. You provide Form 673 to your employer to claim the exemption.

That will at least help to avoid the cash flow crunch that could result when it comes to UK Tax time.

The totalisation agreements are a bit more problematic because they are all written on a model that significantly predates the concept of remote working. You may not be able to avoid paying into the US social security system. Although under most agreements, you would at least be eligibile for a partial US social security pension with at least 6 quarters of contributions.

The biggest headache is as Bev mentions is likely to be for the company. Most countries require foreign resident companies with domestic employees to comply with local tax laws, tax registration, withholding etc as Bev alludes to. It can create a significant administrative overhead and burden and can create what is refered to as Permanent Establishment which has other tax implications for the business, particularly if it has UK Clients.

State Income tax is also a consideration... While most states will treat you as a resident if you live there, some states may consider the business address of your employer. So you could be deemed a resident even if you live in the UK. These rules were introduced not too long ago to address issues where people live in a low taxing state but commute cross border to a higher taxing state in part as a tax minimisation strategy.

US states are not party to the US-UK tax treaty, so you would be entirely at the mercy of State income tax rules on residency.


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