# E1 Uk To US Tax and Salary help!!



## Kevinio (Apr 1, 2014)

Hi there,

I am new to the forums so I hope I have posted this is the right area. I have searched around but have not really been able to find a situation quite like mine and the variety of information around has led me to be a little confused so I hope you guys can help.

Basically my GF is moving back to the US (San Fran) as her 2 year secondment is coming to an end. I would like to go with her to see if we can make a new life together over there work. My company here in the UK is being very supportive of my choice, wishing me to stay on and work with them from home in the US. Part of the reason is that 70%+ of our income comes from the US and as the companies only internal developer we feel it would be a good opportunity for the business to try and work more closely with our US partners dev teams to further increase and improve our operations with them - not to mention our development partner that I help manage is also based in California.

As a result of the above myself and the company are in the process of petitioning for an E1 Visa. My question is, should the VISA be approved, what is the best way to be paid / handle the tax?

We have a US office in NYC that is controlled and operated from the UK, there are 3 employees there and they are paid in USD from the UK business. I know that I will be liable for US tax as I will be in the US more than 183 days. What I can't work out is what is the best way to be paid and pay the correct / best rate of tax with the least hassle. 

Should I continue to be paid via PAYE, pay tax in the UK, and use the tax treaty that way round, or, is it better for me to be paid in USD directly into my US account and handle it that way. I would still need to sign up for the social security treaty as I still want to pay national insurance in the UK during my time in the US until such a point that, should we decide to get married, I apply for US citizenship. If things don't work out for us over there I intend to return to the UK.

Can anyone give any pointers / advice or point me in the direction of a good tax lawyer that has experience of something similar.


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## BBCWatcher (Dec 28, 2012)

There's a whole tax forum section here, so perhaps the moderators will move this thread over.

Preliminarily, I'd keep it simple. Exit U.K. residence (and taxes), get paid in the U.S. just like the other three employees (and at an appropriate compensation rate, perhaps with the company taking some exchange rate risk for you), and pay taxes only in the U.S. which you'd have to do anyway. I don't see how keeping the U.K. in the tax loop adds any value.

I'd reconsider whether it makes sense to stay in the U.K.'s social insurance system for this period. Given that the two countries have a social security treaty it might very well make sense to "vest" in the U.S. system while you're there. That only takes nontrivial contributions wthin any two different calendar years (i.e. less than two years), assuming you've got some years in the U.K. system already or subsequent to this stint. And your employer is obliged to contribute half, unless you do something silly like turn yourself into an independent contractor.


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## Kevinio (Apr 1, 2014)

Hi BBCWatcher,

Thank you for your quick reply. Happy for the mods to move this post to a more relevant forum if required 

I guess the reasons for keeping in the UK tax loop / system are that it makes any potential transition back to the UK more straightforward in the event that things don't work in the US. I am also not sure what impact - if any - moving my salary over to the US branch will have on the way the business operates / pays it's own taxes both in US and UK etc - I have emailed our CFO for info on that point. 

I am hoping things do work out in the US obviously, however, until I know that for sure it just seems easier to leave things as they are as long as it is not too much of a nightmare at the end of the tax year - mainly having to pay US tax returns after paying already in the UK - then claiming a reimbursement from the UK for what I had to pay in US (not even sure that's how it would work). Other issues i could think of about having a "break" from UK banking systems were I to return in 2 years would be a potential drop / issue with my credit rating - i.e. going totally off radar UK wise for 2 years.

I have been working at my company here for nearly 8 years and have 11/12 years of total commercial /working experience.

Certainly no plans of turning myself into an independent contractor.

I hope to speak to an enrolled agent for a free consultation on Thursday so it would be good to go into that meeting at least a little bit more informed / clue'd up than where I am now to be able to ask the best question to get the most out of the consultation.

Thanks


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## Bevdeforges (Nov 16, 2007)

Basically, if the company is transferring you over to the US on a work visa, you don't get a choice about where you pay your taxes. You work in the US, you pay your taxes there. And to do so, it's a whole bunch easier on everyone involved if you're on the US payroll (i.e. being paid out of the US office, like the 3 guys you mentioned).

And I'm not sure, but I don't think you actually get a choice on the social insurances side of things, either. In some countries, I think you can opt to stay in your home country social insurance program for the first few years - but oddly enough, I don't think the US allows that for "visiting" foreigners. (You may be able to buy a couple of years in the UK retirement program, IIRC.)

The issues you mention are definitely worth thinking about - but yes, two years off the radar will affect your credit rating in the UK. And credit ratings are not easily transferred from the US to the UK or vice versa. I had the same thing in reverse when I spent 11 months in the UK and then returned to the US. One of the risks of going expat, I guess. 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

I agree with Bev. There's no question whatsoever you'll have to file and pay U.S. taxes. The only question then becomes whether you'll also file a U.K. tax return (to get a refund), making your U.S. tax return substantially more complicated and extending an interest-free loan to the U.K. until you get your money back. I'd vote no.

I've oversimplified this only slightly. In fact, the issue you're concerned about, whether your U.S. stint will work out, is already built into the process. Within the year that you move to the U.S. you will be a dual status alien from the U.S. tax point of view, and you'll have both U.S. and U.K. tax filings. You might even need to file another tax return in the U.K. the following year depending on the circumstances. So you're already going to have plenty of time when there's an overlap in tax filings. If things don't work out you go back to the U.K., pick up the payroll where you left off, and close out your final year or two of U.S. tax filings.

One thing you might want to negotiate with your employer if you can is tax preparation assistance.

I know someone who worked in the U.S. for only 7 months out of a planned 2 year stint, maybe longer. Those 7 months spanned 2 calendar years with nontrivial income earned in the U.S. in both years. Since she was from a social security treaty country she now qualifies for U.S. Social Security retirement benefits which she can collect starting any time from age 62 up to age 70. (The monthly benefit increases the longer she waits. Unlike the U.K. her benefit is increased for inflation no matter where she lives in the world. The U.K. freezes the benefit level if you move outside the U.K., and you can never regain the inflation adjustments lost.) The monthly U.S. benefit will be small, but for only 7 months of work anything above zero is pretty darn good!

As for your U.K. credit file, the only thing changing is that you won't be working in the U.K. Presumably you'll still have a U.K. bank account and credit card, for example. You're not required to close those accounts when you leave. For the occasional purchase in the U.K. a U.K.-issued card is handy.


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## nikkisizer (Aug 20, 2011)

Hi Kevinio,

I would definitely advise keeping your UK bank account open and maintaining your UK national insurance contributions.

Check out this link which I think you will find of use:

Voluntary national insurance contributions - The Pensions Advisory Service (TPAS)


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## Bevdeforges (Nov 16, 2007)

Just one additional complication to be aware of. The US tax year is a regular calendar year, which does not coincide with the UK tax year (April to April) so the "transition" year tax returns can get a little complicated.

If you can get your employer to spring for tax assistance - even just for the first year or so - it would be a big help. Or, contact those guys working out of the NY office and ask them how they handled the first tax year and the national insurances issue.

It's definitely a good idea to keep your "foreign" bank accounts - whether or not you wind up going back, it's handy to have an account for lots of reasons. (And despite what people tell you, the reporting requirements for normal day to day type bank accounts are pretty simple.) You may want to maintain your retirement contributions until you decide for the longer term. But I'm not so sure that maintaining your NHS coverage will do much for you - you'll have to look into that yourself. You do want to ask about what sort of health coverage your employer provides on the US payroll, though. Things are changing with the implementation of the new health care laws in the US, so you want to make sure you're covered on arrival.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

As Bev pointed out, the U.S.-U.K. social security treaty will explain which system you pay into. It's almost never your own choice.

I'm curious why the U.K. system would be preferred. The U.S. Social Security system in its initial vesting phase (i.e. this period) is damn good, actuarially speaking. The U.K. national pension system has some awful features for U.K. expatriates that the U.S. system does not share, and being sent to the U.S. is automatically raising the probability that you may not retire in the U.K.

Healthcare is an entirely separate matter, and naturally you'll want and expect U.S. medical insurance with your employment -- that's a given. The U.K. NHS isn't particularly relevant while you're in the U.S., and your U.S. medical insurance will almost certainly provide at least emergency coverage in the U.K. and without cost caps -- but just verify that. And you can go right back on NHS if/when you move back to the U.K., regardless of U.K. payroll tax history.

So what's the appeal here of the U.K. national pension? The U.K. will count your U.S. contribution history anyway if there's any question of vesting. But as far as I can tell you get far more retirement annuity benefit out of the U.S. system at this part of the contribution curve. Check my math, but I don't see how you'd beat U.S. Social Security in the rare event you get a choice, and in these circumstances.


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