Contractors' Questions: What to do before work for a US firm begins?

Contractor’s Question: The US company I’m about to start a technology role with has made clear that I will be paid a basic salary, commission, and expenses but will be responsible for paying my own PAYE and NI etc.

It is a full-time position but they claim I’ll be employed as an independent contractor. How should I strike this balance and what benefits of this type of employment can I realise? I’ve heard car depreciation is something I should look out for.

Expert’s Answer: It’s not uncommon for a foreign (e.g. US) company to employ someone (e.g. you) in the UK, needing to be sure appropriate tax and NI contributions are being made.  Having no permanent base in the UK means the US company cannot set up your PAYE scheme. 

But firstly you need to establish if the US company has to withhold any US tax from your due timesheet payment. If so, there are IRS (Inland Revenue Service) forms to complete which, hopefully, will mitigate such withholding. It is the US company which has to trigger, process and submit these forms.

Your question describes you as being “employed as an independent contractor”. This seems to be a contradiction in terms. You cannot be operating as both on the same assignment. As the US company is making you “responsible for paying PAYE, NI, etc,” logic dictates you will be ‘employed’, not ‘self-employed’.   

It’s only an educated guess, but I imagine the US company is embracing both structures in an attempt to avoid any UK labour law responsibilities as your ‘employer’. You may want to show your contract to a UK employment lawyer to ensure your UK employment rights have not been mistakenly diluted or even erased.  Contract clauses for UK employment cannot override UK law.

In addition, you need to connect with your local HMRC office in order to set up your PAYE scheme and receive guidelines for running it.

As regards ‘car depreciation,’ this is unlikely to affect you based on the details provided or the circumstances I envision you working in. Of greater importance, I’d suggest, is for you to keep accurate mileage records of business travel and, reflecting the allowance shown on HMRC’s website, send those records to the US firm for them to approve and pay you. Good luck!

The expert was Mike Philips, a director at its international, a consultancy specialising in tax and finance for contractors working in the UK and overseas.


Thursday 13th Jul 2017
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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