Freelancers' Questions: Is doing the US client's work there or here less taxing?
Freelancer’s Question: I’m a designer in receipt of an exciting offer to potentially work for an American start-up in New York! Would it be more tax-efficient, and financially viable for me to join them in the US or do the work here, remotely?
The client is easy either way; the work would be regular but only at certain times of the year I think. Is it more feasible to go there with my ‘Ltd’ company or do it here as a 'Ltd'? Are there tax, visa or legal issues that I need to be aware of, and will I be charged tax from both the UK and the US?
Expert’s Answer: Being a professional freelance consultant, in the way that many independent professionals have been able to in the UK and in much of continental Europe, is not an option in the US.
This restriction is not linked to visa requirements. Indeed, agencies can sponsor visas, However, in the US people do not normally act through Personal Service Companies (also known as ‘Limited Companies’ here in the UK), because laws force them to be the direct employees of the agency.
If you wish to work in the United States for a temporary period, you will require a non-immigrant work visa. You cannot work on a visitor or business visa, or under the Visa Waiver Program (VWP).
Unlike in some countries, the United States government does not issue work visas for casual employment. In general, work visas are based on a specific offer of employment. In most cases, a petition must be filed and approved by the United States Citizenship and Immigration Services (USCIS) before applying for the visa at a US Embassy or Consulate.
As a UK tax resident, you will continue to be tax liable in the UK on your worldwide income and this can only be avoided by being out of the UK to work for a full tax year. This means that whatever happens any income from the US received by you or your company will be subject to UK taxation.
Were you to work in the US you will also become subject to taxation on your US income in the States. You would have to be employed by the sponsor of your US work visa so that using your PSC would not be an option.
You need to bear in mind the expense of commuting to the States and accommodation there -- expenses which you would presumably not have to incur if you were to work from home in the UK.
In your case the most attractive, simple, least disruptive albeit less exciting route would be to work remotely from home in the UK with occasional visits to the US, if required, but not to carry out the duties for which you are being remunerated. Good luck!
The expert was Kevin Austin, director at Access Financial, a tax and accounting specialist serving UK freelancers and contractors working overseas.
Editor's Note: Related --
9th February 2018