Client is a US citizen, obtained spousal visa and became UK tax resident recently (will spend majority of the tax year in the UK etc). Client is an international performer working on a self-employed basis with roughly 70% income dervived in USA, 30% in UK, ad-hoc bits elsewhere.
1) As a US citizen they all have to file a tax return in the USA despite being non-resident, and will need to declare all income/expenses for work performed in the USA on their US taxes (their CPA will deal with filing these).
2) As a UK tax resident they will file a tax return here declaring their worldwide income and get relief for any foreign taxes suffered.
The potential issue, is that what they can claim for expenses in the USA is different to what is allowable for tax here, e.g. round sum per diems (not used to keeping any receipts), more varied expenses than here. But it doesn't seem right that I would need to calculate a 'new' set of accounts from scratch based on which US expenses the UK would allow to be offset against the USA gross income? Should I compile all their worldwide income, worldwide expenses into one set of self-employed accounts, per what the UK says is allowable, expense wise?
It would seem more sensible to take the net american profit (per the USA accounting rules), USA taxes paid, and use these figures straight from the american tax return (pro-rata'd for relevant years), for the UK tax return, but I am struggling to satisfy myself that this is definitely valid, though it would seem to be the general principle from reading some of the double tax treaty (and getting a bit bogged down)?
If this is valid, would you just add the US figures to the UK self-employed figures? Or would it be sensible to declare the American business as a separate self-employed business to their UK/Europe self-employed business (though type of work is the same, one agent, one website etc)?
Thanks in advance for any replies.