# Tax question for US Contractor working in UK on temporary contract



## Kathaleen (Jul 10, 2010)

Hello. I am a US citizen working as a contract employee in the UK on a temporary (6-month) assignment. I am being paid by a UK company directly into my US bank account, but am currently not being taxed. 

I'm worried about what taxes I will owe at the end of the assignment and am trying to avoid taxation by both the US and the UK, and would prefer to pay US taxes versus UK, if that is an option. Is anyone familiar with this situation and do you know whether I will be obligated to pay UK taxes even though I'm being paid only into a US bank account, or does that even matter? Any advice would be appreciated! Thanks in advance.


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## Bevdeforges (Nov 16, 2007)

How you are being paid and into what bank account has no bearing on the situation.

As a US citizen, you will have to declare and probably pay taxes on your earnings in the US. I'm not all that familiar with UK tax law, but that may be the basis upon which your pay is not being withheld in the UK. To be eligible for the US overseas earned income exclusion you would have to be physically present overseas for at least a year.

But because you aren't resident overseas, you'll also be expected to pay US self-employment tax - i.e. both halves of the social security contribution - on your earnings.
Cheers,
Bev


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## Kathaleen (Jul 10, 2010)

Thanks, Bev, for your response. 

I'm curious if anyone familiar with UK tax law knows what determines whether you are required to file in the UK versus the US if you've split time between them? I've seen a mention of 183 residency, but am not certain if that is the only deciding factor. Would appreciate any information you might have.

_Background: my husband is a US-based contractor (self-employed) doing contract work for a UK company. We have been in the UK for almost 6 months now and are NOT currently having taxes taken out on either side so trying to minimize the big tax hit at the end of the tax year. Our preference is to pay US taxes, rather than UK, so that we can take advantage of our tax write-offs in the US (we own a home there) to offset some of the income taxes due._

Thanks!!


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## Bevdeforges (Nov 16, 2007)

The 183 day rule is not the determining factor, but most countries use this as a quick rule of thumb as to residency and thus taxability. If you are physically present 183 days in a tax year in the country it is "presumed" you are resident absent evidence to the contrary.

Other factors include such things as where you have your primary "center of interest" - business, personal assets, family, regular commitments (like medical treatments, banking, etc.), intention to remain, where you spend most of your time, ties to the community, etc.
Cheers,
Bev


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