Working for US company

[lookitsjonno]

Got a potential offer to work remote for a US company. I assume I would have little or no employment rights and would essentially be working as-per a contractor. If so would this mean I'd need to register for VAT if my earnings exceeded £85k?

Probably a question for an accountant, but just after guidance at this stage.

 

[shifty_uk]

It depends if they have a UK subsidiary or not? Do they employ other people in the UK?

 

[Felon]

Contractor doctor: what is my tax situation if I contract for a US company?

Contractors may find themselves offered work by US-based companies. They can accept this without concern, and expect UK working conditions. But the culture gap is something to be aware of.

www.contractorcalculator.co.uk

Some useful info there,

I actually used to do this, but I did it via a third party company (my contract was with the UK company, which existed only for payroll processing and tax reasons) then farmed me out to the company.

I believe you can go direct if you wish, but I'd certainly speak with an account who knows the contracting market,

 

[lookitsjonno]

It depends if they have a UK subsidiary or not? Do they employ other people in the UK?

Nope, they literally have a hand full of people in across Europe

 

[Felon]

As far as I know, there's nothing wrong with just billing them for your hours and having them pay you in dollars (not sure how that's gonna work, might cost you) and then just declaring your income to HMRC. You'll be domiciled in the UK and paying UK tax, so I think that's ok..... (again ask an expert to be sure!)

 

[shifty_uk]

In that case yes, you'll be a contractor with no employment rights as such but will be governed by the contract in place.

VAT registered yes, there's more upsides to doing so.

Get a good accountant, it wont cost much.

 

[dowie]

Nope, they literally have a hand full of people in across Europe

That doesn't mean they can't have a subsidiary btw.. (as you said you're assuming in the OP), they might set them up on paper but with no physical office location and handle those employees or indeed they might be contractors as you suspect.

There are companies out there that help companies hire overseas remote workers and deal with local regs etc.. so it is possible to be a salaried employee and be the only employee simply working remotely from your location, see for example https://remote.com/ .

VAT registered yes, there's more upsides to doing so.

Yeah AFAIK if he's a contractor he'd have to register for VAT but... wouldn't be applying any VAT to his invoices *if* the entity he's billing is overseas in the US. He would perhaps however need to check whether local (depending on the state they're in I presume) sales taxes apply!

As @Screeeech has pointed out the client may want to pay in USD though that doesn't have to be the case, they can certainly pay overseas suppliers in their native currency.

 

[thenewoc]

Are you able to contract with such international company on a service provision basis rather than an employee, thus outside IR35 or does IR35 simply not apply at all anyway because it's an overseas client?

 

[Lopéz]

I actually used to do this, but I did it via a third party company (my contract was with the UK company, which existed only for payroll processing and tax reasons) then farmed me out to the company.

Same for me; my employer was a Canadian company with a UK entity, but when I moved to Austria they had no entity there, so my contract moved to a payroll provider out here.
Still got holidays, sick pay etc like any normal employee.

 

[dowie]

I wonder what the liability is for those third-party companies... like suppose a US tech firm lays you off, if you're a UK employee they'll still need to fund redundancy. Or likewise, if you win large amounts of damages in an employment tribunal against the, I guess, thrid party payroll company (technically your UK based employer)... seem like there are some risks for them - presume they can insure against that stuff if their client goes bust or indeed have contracts with clients that mean the client has to pay up more.

I do wonder though, if you're willing to take the FX risk and give up the employment protections, then perhaps worth while contracting directly... no IR35 and potentially a much larger comp deal.

 

[Moley]

I work for a US tech company who has an all-remote workforce across EMEA. About 20 people all told. Everyone is an employee with a local law employment contract. So I'm employed under UK law. They should do the same unless you like being an at-will employee with no rights.

 

[dowie]

That's pretty much the same for contractors with UK companies too though, you can be let go at will and have given up your employment rights... but you've done so because you want the money.

 

[thenewoc]

That's pretty much the same for contractors with UK companies too though, you can be let go at will and have given up your employment rights... but you've done so because you want the money.

You give up some rights such as sick pay and holiday from the client because being outside IR35, you're not working for the client, you're providing a service. It's up to your company how you agree the contract with the client or agency as to what termination clause you include. The holiday and sickness benefits are between you and your own company as to what you deem is right from the cost that you're charging for your service. Since you're charging for the delivery of a service you could take holiday & sick pay providing you can still complete the deliverable(s) by the agreed contract date(s). You could also hire your own staff to do some of the work, either the basics or a direct replacement for yourself, so the work can continue with you being present or not for short periods. You are really fulfilling the role of an appointed representative to see that the contract is delivered on time and to spec but that doesn't mean you have to be doing it all yourself. That is the ideal situation vs being a contractor inside IR35 or on a FTC as a PAYE employee as neither of those have any more job security and are paid a lot less. Also, those last two are often incorrectly used by employers who don't want to take the risk of taking someone on outside IR35 even though they are looking for the contractor to direct themselves as the client rather than the client giving direction to the employee.

I've seen examples of certain IT jobs where the outside IR35 rate is two or three times that of similar roles inside IR35 or FTC PAYE so many will want to forgo the faux employment rights as any IT position based on a project has no long term employment security anyway. Not having the client perks is what helps to differentiate the contractor from being a regular employee among other things.

 

[dowie]

Paying yourself sick pay as a one-man band is kinda moot, it's just what you're able to bill that counts, not working for a day is still not working/billing anything whether you notionally are still paying yourself sick pay or holiday pay from your ltd or not, you're still going to get that money from your ltd to you one way or another.

I'm not sure you could necessarily swap in another person if contracting for a company overseas it's something you typically want here to tick the right boxes and avoid IR35 but it's pointless to want to include all that stuff and try to tick all the boxes as with US client AFAIK you'd be, by default, outside of IR35 anyway.

 

[thenewoc]

Paying yourself sick pay as a one-man band is kinda moot, it's just what you're able to bill that counts, not working for a day is still not working/billing anything whether you notionally are still paying yourself sick pay or holiday pay from your ltd or not, you're still going to get that money from your ltd to you one way or another.

I'm not sure you could necessarily swap in another person if contracting for a company overseas it's something you typically want here to tick the right boxes and avoid IR35 but it's pointless to want to include all that stuff and try to tick all the boxes as with US client AFAIK you'd be, by default, outside of IR35 anyway.

Paying sick pay out of your own ltd company is more useful from a contract perspective for outside IR35 when applicable as its worth more to be outside IR35 than to have any client sick pay as the chances of most people needing sick pay is low. It does come out of your turnover but you couldn't pay yourself all of your turnover anyway without going over the higher tax rate, unless your turnover was small of course. I think most people would still pay themselves even between contracts, your employment with your own company isn't really meant to start and stop to coincide with clients, and it's usually a very nominal salary anyway. Getting the sick pay and holiday pay from your own company though just proves how little you're giving away by not being a client employee because the contract rate would be much higher anyway so the fact some of it is being drawn upon for sickness and holidays is still a lot more beneficial if your contract is two or three times the rate of a client salaried employee. There are some other perks you forgo too but quite limited value such as a staff subsidised canteen, free staff parking and training.

Ideally the contract should be for producing various deliverables rather than billable time, that way you can scale and deal with multiple clients.

I'm not sure whether someone would be outside IR35 just because it was an international contract. The problem I think would hinge more on the clients reputation and likely hood for remaining in business. If they decided to let you go without any notice even if it were in your sales contract, you'd have a hard time I suspect of justifying the legal cost to fight a case and in what jurisdiction that would take place.

 

[dowie]

IR35 puts the onus on the "employer" to deduct tax and national insurance etc. those UK regs don't apply to an overseas/US company. I guess maybe it's useful to theoretically have provision to pay yourself sick pay in case HRMC wants to look at you/your own ltd etc. but contractors have generally been fine for years avoiding being classed as hidden employees, it's the updated rules for "employers"/companies contracting your services that seem to be having the biggest impact and those don't apply here.

 

[lookitsjonno]

I work for a US tech company who has an all-remote workforce across EMEA. About 20 people all told. Everyone is an employee with a local law employment contract. So I'm employed under UK law. They should do the same unless you like being an at-will employee with no rights.

Thanks. How did you draw up and agree the local law employment contract with the US company? How do you go about getting paid, do they pay you in GBP or USD and how do you deal with the FX?

 

[Ev0]

My place use a local payroll outsourcing service for the UK employees, all paid in GBP (contracted pay is all in GBP) and handled like any other UK role.

 

[Moley]

Thanks. How did you draw up and agree the local law employment contract with the US company? How do you go about getting paid, do they pay you in GBP or USD and how do you deal with the FX?

They employ a local accountant who deals with all that.

 

[Housey]

Most will have a UK entity and you will be employed under UK working laws. I have worked for US West Coast tech companies on and off for 30 years.