UK Company - US employee working in US, which taxes?

UK Company - US employee working in US, which...

Didn't find your answer?

We are a UK company and will be employing a US person to work in the US for us.

Where can I find info we need on how to pay them - tax rules, etc?

Will the employee have a UK or US contract, and therefore will we have to pay taxes in US or UK?

Thanks.

Replies (9)

Please login or register to join the discussion.

avatar
By tonycourt
21st Jun 2012 22:33

USA

Hi armelle55,

I'm a little rusty on this subject but I think I can point you in the right direction.

Normally anyone working for a UK company would be taxed on employment income in the UK. However because the individual concerned is and will remain a US resident they will also be taxable on employment income there. Therefore you need to resort to the DTA agreement - article 14 is where you should head to. Here's a link:

http://www.hmrc.gov.uk/taxtreaties/in-force/usa-consolidated.pdf

The upshot of this is that the individual will be taxed only in the USA. However you should go through the normal new employee PAYE procedure in the UK, but ask HMRC to issue an NT code in respect of UK tax.

Pages 55/56 of HMRC's current CWG2 Employers Further Guide etc give you nod in the right direction - I think the bottom line is you need to contact them.

As far as National Insurance is concerned, not my field of expertise, my understanding is that because the employee is a non-EU national and working outside the EU he or she won't be liable to employee's NI, not sure whether employers NI will be due. Basic NI rules for employing someone overseas can be found by following the links below

www.hmrc.gov.uk/nic/work/abroad-index.htm

and

http://www.hmrc.gov.uk/cnr/osc.htm

You'll probably need to speak to HMRC's overseas NI specialist group - you'll find their contact details by following the links above.

Lots more I could say, but time is short. I hope this has helped.

 

TC

 

 

Thanks (0)
Replying to FirstTab:
By aiwalters
22nd Jun 2012 01:21

not quite right

tonycourt wrote:

Normally anyone working for a UK company would be taxed on employment income in the UK.

The upshot of this is that the individual will be taxed only in the USA. However you should go through the normal new employee PAYE procedure in the UK, but ask HMRC to issue an NT code in respect of UK tax.

Pages 55/56 of HMRC's current CWG2 Employers Further Guide etc give you nod in the right direction - I think the bottom line is you need to contact them.

As far as National Insurance is concerned, not my field of expertise, my understanding is that because the employee is a non-EU national and working outside the EU he or she won't be liable to employee's NI, not sure whether employers NI will be due.

There is no UK tax whatsover, no need for "normal new employee procedure", no need for the DTA, no need for a P46, P14 or entry on the P35. There are no NICs (neither 'ers nor 'ees). You do not need to ask HMRC to issue an NT tax code, however if your payroll software requires a tax code, just use NT for tax and X for NI. 

I think page 58 (paragraph 112) of CWG2 will be more helpful than pages 55/56.

I'm assuming, of course that the employee will not be doing any work in the UK.

 

In short, you pay gross, and they'll pay US tax through their US tax return.

Thanks (0)
Replying to Briar:
avatar
By tonycourt
22nd Jun 2012 09:18

Thanks

Rustiness showing! - thanks useful to know.

You're right page 58, but the paragraph is 121 

TC

Thanks (0)
By aiwalters
22nd Jun 2012 09:27

touché
Mistyped. Correct paragraph is 121 as you pointed out

Thanks (0)
Euan's picture
By Euan MacLennan
22nd Jun 2012 09:54

P38A

The only UK tax document you will need to prepare and submit to HMRC is form P38A, Employer's Supplementary Return, at the end of the tax year.  The details of the payments to the US based employee have to be entered in Section A.

Thanks (0)
avatar
By zarathustra
22nd Jun 2012 11:56

What about US payroll taxes?

I freely admit this is not an area of knowledge for me, but doesn't the company need to establish a US payroll to pay employees there?

Thanks (0)
Replying to johngroganjga:
By aiwalters
22nd Jun 2012 13:31

FUTA

zarathustra wrote:

I freely admit this is not an area of knowledge for me, but doesn't the company need to establish a US payroll to pay employees there?

You are technically correct, as per US Tax law, that FUTA and FICA (http://www.irs.gov/businesses/small/international/article/0,,id=131637,00.html and http://www.irs.gov/businesses/small/international/article/0,,id=105251,00.html) needs to be paid.

 

Thanks (0)
avatar
By armelle55
27th Jun 2012 13:03

great many thanks to all, very helpful!

Thanks (0)
avatar
By paolac
05th Feb 2013 10:07

Hi Armelle55

Can I ask you how you sorted the employement situation ? did you have to open a local branch in the US  as my accountant suggested? I would be very grateful fi you could let me know

 

Thanks (0)