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Sole Trader VS Limited - ongoing long term contract / IR35

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    #21
    Originally posted by swissdt View Post
    Thanks James, i very much doubt the US company would go for the DPNI, as its a contract, but I can certainly broach the idea! If they could employ me would they get hit with tax US end on the payment to me? or is that IRS questioning material?
    They are responsible for their own compliance and your role in that (they may ask you to complete a W8-BEN, for example). The contract and how you pay tax are two different things. Equally, on your end, the correct payment of UK tax is between you and HMRC. The US company will know nothing about that. Again, though, I think sole trading is probably your best option. You’ll submit a SATR at year-end and you won’t need to worry about running a company or IR35, for example. Just make sure you do all the work in the UK, otherwise things will get more complicated for several reasons.

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      #22
      Thanks again James, i'll probably end up with a call to HMRC and IRS depending what the US company says, but the advice on here has been invaluable, and set it all out perfectly in my mind.

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        #23
        Originally posted by Jess inniAccounts View Post
        When considering Limited vs Self -Employed, it is not always just the tax incentives you need to consider. Having a limited company allows you to control your remuneration strategy so you could build up a war chest for periods when you may not have active contracts.
        Sorry, but this isn't clear thinking at all.

        As a sole trader you can build up a war chest, too. The difference is that you pay tax on your war chest when you earn it as a sole trader, and your war chest is in your personal funds, while with Ltd your war chest is in company funds and you pay tax when you take it out of your company. It really is just a matter of tax incentives for Ltd (and war chest handling / remuneration is one of those incentives) vs lower regulatory burden for sole trader.

        There is no reason at all to 'control your remuneration strategy' except to gain a tax benefit. If there were no tax benefit, for a one-man band there would be no reason to leave any excess funds in a Ltd Co.

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          #24
          Update, spoke to HMRC, several times today, who didn't really have a clue, they kept trying to put me through to tax technicians/call to support, who then advised to write in which is a 14 working day response time. A lot of them mentioned the UK-US1 form, which on googling looks completely wrong!

          In the interim spoke to a few accountants who run DPNI schemes for existing clients and they could do it all for me which seems the favorable way.

          Finally spoke to the IRS, who advised the 1040NR form, schedule OI, page 5, to ensure I don't pay US Tax, https://www.irs.gov/pub/irs-pdf/f1040nr.pdf + https://www.irs.gov/pub/irs-pdf/i1040nr.pdf

          Although they couldn't confirm whether the tax treaty would cover me, and i'd have to read/research publication 901



          Imgur: The magic of the Internet

          Publication 901 has an odd bit here which doesn't seem to make sense, RE the employer is a US resident?

          Income that residents of the United Kingdom receive for services performed in the United States as employees (dependent personal
          services) is exempt from U.S. income tax if the residents meet the following requirements.

          They are in the United States for no more than 183 days in any 12*month period beginning or ending in the tax year.

          Their income is paid by, or on behalf of, an employer who is not a U.S. resident.

          Their income is not borne by a permanent establishment that the employer has in the United States.

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            #25
            I think IRS have probably sent you down the same garden path as HMRC, TBH.

            I'm afraid national tax/revenue agencies are pretty much universally crap.

            You will be performing services wholly in the UK, as I understand it. That makes it "non-US source income". You are not a US citizen (I assume) and you will not be physically present in the US at all. Thus, you are a "non-US person" too. There should be no tax liability *and* no reporting requirement for the "non-US source" income of a "non-US person", so 1040NR is irrelevant. The client may ask you to complete a W8-BEN for their benefit (something they hold on file, but don't share with the IRS).

            Basically, I would expect the client to treat you as a contractor and for you to register w/ HMRC for DPNI as having an overseas employer. Like I said, the contract and tax are two different things.

            By all means, get some professional advice, but I think you've been sent down the garden path by both HMRC (I did warn ) and the IRS. Forget about them and speak to someone that has a clue.

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              #26
              I believe JB is correct. The only tax helpline I've found to be reliable was Germany, and that was a while ago, so who knows.

              Everything changes if you are a US citizen or otherwise considered to be a US Person. If you've never lived there and aren't a citizen then all of this is none of their business and the IRS person you talked to is an idiot.

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                #27
                Originally posted by jamesbrown View Post
                I think IRS have probably sent you down the same garden path as HMRC, TBH.

                I'm afraid national tax/revenue agencies are pretty much universally crap.

                You will be performing services wholly in the UK, as I understand it. That makes it "non-US source income". You are not a US citizen (I assume) and you will not be physically present in the US at all. Thus, you are a "non-US person" too. There should be no tax liability *and* no reporting requirement for the "non-US source" income of a "non-US person", so 1040NR is irrelevant. The client may ask you to complete a W8-BEN for their benefit (something they hold on file, but don't share with the IRS).

                Basically, I would expect the client to treat you as a contractor and for you to register w/ HMRC for DPNI as having an overseas employer. Like I said, the contract and tax are two different things.

                By all means, get some professional advice, but I think you've been sent down the garden path by both HMRC (I did warn ) and the IRS. Forget about them and speak to someone that has a clue.

                Thanks James, I didn't have high hopes after some pre warnings on here about HMRC and ringing them up for a satisfactory resolve

                The IRS chap too who was manning the international enquiry line, it felt like he was googling the answer when he kept putting on hold at each question!

                I've found some good accountants on Friday so all being well i'll be able to get everything up and running, depending which path I take.

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                  #28
                  Originally posted by WordIsBond View Post
                  I believe JB is correct. The only tax helpline I've found to be reliable was Germany, and that was a while ago, so who knows.

                  Everything changes if you are a US citizen or otherwise considered to be a US Person. If you've never lived there and aren't a citizen then all of this is none of their business and the IRS person you talked to is an idiot.

                  Sounds exactly right!

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