The individual has been living in the USA the whole calender year and the business is a consultancy one all performed online from their home. All monies are paid into UK bank accounts and the £ has remained in the UK. They will remain in the USA for at least 3 years. Would this be classified as non resident but taxable as remitted in the UK. Can anyone simplify what this will mean in the US for the tax return there?
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Make yourself familiar with HMRC6.
http://www.hmrc.gov.uk/cnr/hmrc6.pdf
There are other considerations to make yourself aware of, but self-employment duties carried out abroad are treated the same as employment if you meet the criteria for non-resident status (days in the UK etc).
On the face of it, it would 'appear' that all income from that activity would not be taxable in the UK, regardless of remittance.
They would of course, be subject to tax on their worldwide income in the USA and should file the appropriate returns there as a resident.
USA
There is no liability for UK Taxes due to the time spent in the USA there will however be a liability to US Taxation and you should register there, go to a cpa there and he will set you right
Assuming 2012 is the calendar year you're referring to and 05 April 2012 is the relevant tax year you will need to check if the individual was tax resident in the UK during the tax year. Also remittance basis applies to non-domiciled persons tax resident in the UK or to a UK domiciled not-ordinarily resident person.
You may find it better to get US tax advice here in the UK as a UK based American tax specialist will be more familiar with relevant US reporting.