I am a US citizen residing in California. I work exclusively for a UK company. My income is transferred from UK to my bank account in the US. I travel to UK 5-6 times a year for about 3-4 months away from California. I work from my home in California when I am not in the UK. How do I find out about taxing laws that affect me or the company I work for in the UK?
I don’t imagine the tax laws will affect your UK based company. However, you most certainly are subject to U.S. tax laws. Your best bet would be to hire a competent accountant to help you navigate the tax laws in your state.
You are definitely earning income inside the US; you just have a foreign employer.
In any event, the US taxes your worldwide income and that means CA will too. The provisions to exclude foreign earned income is pretty strict; one qualification would require being outside the US for at least 330 days in a 360-day period. Even then, you can only exclude about $85,000.
That’s about all I could say without knowing a lot more about the scenario. It’s possible that you should consider yourself self-employed for US tax purposes. You definitely need to find a professional who can provide a qualified opinion on your situation and filing requirements.
I think the OP is asking how he finds out about his UK tax liability.
There will also be a tax treaty (or treaties) between the U.K. and the U.S., and they will partly have the aim of ensuring that income taxed in one country is not taxed in the other country. However, if the OP does not reside in the U.K. for tax purposes, and if the income is deposited directly into a U.S. bank account, I suspect it’s not taxable income in the U.K. The OP does need to check if those “3-4 months” spent in the U.K. make him resident in the U.K. for tax purposes.
And if the OP lives in California, and is having money sent to a Californian bank account, I expect that’s enough for the tax people in Sacramento to want to get their percentage of the income. I’m not sure how double taxation treaties work in Californian law, if the income is also taxable in the U.K.
I doubt that the question of where he deposits his cheques is going to affect his tax liability; why would it? The point is that he earns this income in the UK. Even if he is a non-resident of the UK for tax purposes (and, as you point out, he needs to investigate that), is a non-resident liable to UK income tax on UK earnings? From memory the answer is “yes”. There might well be some relief under the US-UK Double Taxation Agreement, but I doubt that he can avoid UK liability by conductin his banking business in the US. Why would the UK impose a tax on the UK earnings of non-residents, and then grant them a waiver if they pass their UK earnings through a foreign bank account?
(1) From the description in the OP, I don’t think there’s enough connection of the income to the U.K. for it to be taxable there. In addition, if it were taxable, why wouldn’t the employer be taking out PAYE tax before paying the OP? However, I think the location of the bank account is important: if the bank account were in the UK, then it would be taxable income in the UK even for a non-resident.
(2) Double-taxation agreements generally provide relief in the second country, not the first one where the income is taxable. For example, while I was resident in the US I had an Australian income which was taxable both in Australia (because it was my income in Australia as a non-resident) and in the U.S. (because as a U.S. resident my worldwide income was taxable). On my U.S. tax return I got a credit for that income because it had already been taxed in Australia. (And then a few years ago Australia stopped taxing that kind of income, so I no longer got the credit in the U.S., and I had to start paying tax in the U.S. on it.)
The important point is whether or not he’s a resident of the UK. I don’t think he is, based on his OP.
I mean, I worked for years for a company based in Amsterdam, while living in California. The company withheld US and state taxes, and I was responsible for filing federal and state tax returns. I certainly was not responsible for Dutch taxes; I hardly ever set foot in the Netherlands.
Which makes your position different from the OP’s; he spends signficant time in the UK.
The issue is not, I think, where his employer is resident, but where his employment takes place. It’s possible to be employed in the UK while being a non-resident of the UK. The income from your UK employment is UK-source income, and is taxable in the UK.
The OP doesn’t give anything like enough detail to say whether he has a UK tax liablity. We don’t even know whether he is employed in the strict sense, or whetehr he is a contractor providing service to a client. This distinction is typically very important in UK tax practice.
The OP’s question is “how do I find out about taxing laws that affect me or the company I work for in the UK?” and I think the answer is “he gives all the facts to a UK tax practitioner and asks him to advise”. He’s said enough here to suggest that, yes, he may very well have a liability to tax in the UK (and a corresponding entitlemetn to a deduction or credit in the US) so it would be worth his while to lay out a few dollars to get qualified advice.
If the OP is in the UK for over 90 days in a tax year, he may still be taxed (as non-resident, non-ordinary resident.) The tax laws and the tax treaties are complicated. I used to be involved in the tax treatment of individuals who spend part-time in a different country, and it was NOT simple. But my info is over ten years old, so I’m not about to give specific comments.
“Residency” in most of the tax treatries is based on physical presence in the country. A person physically present and earning income in a country for more than 90 days in a tax year, may be subject to tax (or filing) in that country. For a US citizen, you will certainly need to report ALL income for US tax purposes and will be taxed based on world-wide income. Whether you need to file in the UK… well, that depends.
I agree with UDS that you need to seek professional advice, but I’m not sure that a typical UK tax practicioner will know how to deal with the US treaty. My suggestion is to find an expert in international (expatriate) taxation, who will know both US and UK and the treaty between them. The huge accounting firms have such experts, and it would be worthwhile seeking their advice. Alternately, your UK employer might have such persons in-house (especially if they have many other employees spending a few months in the UK.)
Please note that, even if you do owe taxes in both countries, you will probably be entitled to a tax credit (or partial credit) against US taxes for taxes paid to the UK Inland Revenue. So, the total tax bill will not be much different from just paying US taxes, but WHERE you pay could be different. Get professional help.