Paying tax in both UK and US?

ChrisWalker

I’m a UK resident, and will be working as a sole trader, with a small US company as my client. I believe I have prepared everything correctly, in terms of billing the client in US Dollars, converting to GBP via my Wise (multi-currency) Business account, recording all my financial transactions in my Crunch account and registering with HMRC for self-assessment to pay all required UK taxes.

At the US company’s request, I have filled in a ‘W-8 BEN’ form, which, as an international person from the US perspective, I understand allows me to claim exempt status from withholdings related to tax in the US.

As mentioned, I will be operating as a sole trader, registered for self-assessment and paying all required UK taxes, national insurance, etc. as a UK citizen.

Therefore, to the best of my knowledge, I am only required to pay tax in the UK, and have no obligation to pay any further kind of tax in the US.

Can anyone confirm that my understanding is correct?

Thanks!

TomFromCrunch

Hi Chris, I’ve just spoken to one of our expert accountants - they’ve asked me to clarify that Crunch does not give international tax advice and you must seek specialist advice if needed from a US accountant. However, I was able to obtain this general advice:

“You are right that you should only be subject to UK tax on your worldwide income since you are a UK tax resident. However, when working with international clients, you need to consider that those international clients have to abide by the tax laws in their home countries and one such common law is the withholding of a portion of the income due to you by your international clients who then remit the amount withheld to their tax authorities. This is called withholding tax. The foreign tax authorities accept that not everyone (especially non-residents) is meant to be paying taxes in their country and as such, make it possible for you to make a formal declaration to prevent any of your income being withheld by your international client. We believe W-8 Ben form is one such declaration required by the US tax authorities allowing your international clients to pay you your gross amount (please discuss with a US accountant if needed).”

Might not be as specific as you’re looking for but I hope this is helpful!

ChrisWalker

Thanks very much Tom. Completely understood about the withholding of a portion of payment - as mentioned in my post, I have already completed a W-8 BEN form for the US client, and this is exactly how they explained it to me too, i.e. it negates their need to hold back a portion of the amount for which I invoice them. I took this to mean that I am therefore not obliged to pay any tax in the US, and whilst I understand that you’re unable to give any formal international tax advice, it’s good to know that your accountants are in agreement on the general concept of only paying tax in the UK!

Thanks again for your help,
Chris

TomFromCrunch

No worries Chris, have a great day!

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