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UK domicilied self-employed consultant in international development is now living in the US where she is doing unpaid work in the non-profit sector, and has also had some self-employed income from working elsewhere in the world . The non-profit work is also in international development. She does not have a green card and is not registered to pay tax in the US, although her days out of the UK make her technically a non-resident here.
I have 2 questions:
Should she pay tax in this country?
If so, is there any chance of claiming expenses as a result of the pro-bono work?
Roxy Grimshaw

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By wdr
19th Jun 2006 14:23

Non residence for UK tax is an independent question
There is a common misconception that UK tax status as resident/non resident is affected by residence status elsewhere. It isn't.

So whether the consultant is tax resident in the US will have no impact in deciding UK tax residence. Where an individual is tax resident under the domestic rules of two countries, then the treaty between the two will say which country has the primary taxing rights, but will not change the domestic tax status of the individual. This is even the case where , as seems to have happened here, there has benn a failure to register as a US tax resident.

If she is neither UK tax resident nor has any UK source income in the UK, then she has no filing obligation here whether or not she files in the US.
The question of relief for pro bono expenses is a difficult one where it is a UK tax resident who is claiming the expenses, as the 'wholly and exclusively' test is difficult to satisfy- but if she is bein paid for her self employed work that is not pro bono.

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By AnonymousUser
17th Jun 2006 17:06

US tax requirement.
Not being "registered" to pay tax in the US doesn't matter diddlysquate. As long as she meets the physical presense test in the US (>182 days over a three year period), then she is required to pay tax on her worldwide earnings, including self-employment tax (equivilent to NI).

The form she would file is a 1040 with a W7 attached; the W7 would allow her to get a Taxpayer Identification Number, which makes filing next year easier. She may also have to file Form TD F 90-22.1.

If she meets the definition of resident of any other country, including the UK, then the treaty may remove the US tax, but not the filing requirements.

I'll let a UK person answer the question you asked.

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