If I set up an LLC company in the US and pay myself a salary from it to myself in the UK I would obviously declare that on my self assessment return as foreign income, but what about any money that is left sitting in that LLC in the states? i.e. money I have not brought over to the UK? Does that not need to be mentioned at any point in the return? I basically want to be able to limit how much i get paid in the UK so I do not go over the £77K point and have to start worrying about VAT.
System of Law: England-and-Wales
Setting up a structure LLC in USA means that one pays income tax where the profits are paid, therefore UK tax applies if you a UK resident and domiciled. The US tends to withdraw 30% on the income in US which you can claim under double taxation re withholding tax payment in US.
From April 2008, most people living long-term in the UK with foreign income are liable to tax on worldwide income and gains ie HMRC will tax you on that total income as if the LLC structure was not in existence. In practice, the remittance basis only now applies in certain limited cases which are discussed below. There a number of legislation that will make it difficult for you to avoid the tax on total income including the anti-avoidance legislation (known as the "transfer of assets abroad" provisions) which again calls for your income to be taxed on total income irrespective of the legal structures you put in place. In addition, given the current government’s increased drive to ensure tax anti-avoidance, this is the likely outcome.
However if you are not a UK domiciliary, you can choose to have your non-UK income and gains taxed in the UK only to the extent that they are brought into or enjoyed in the UK hence you only taxed on the ‘remitted’ income and gains but an annual £30,000 or £50,000 remittance basis charge may also be due in certain situations.
Rules for remittances keep changing and for2012/13 remittance limits see http://www.hmrc.gov.uk/international/remittance.htm
There are few things you need to clarify on the VAT questions: are you doing business in the UK, or intend to start? If you are the then the current registration threshold of £77,000 stands. Im still not sure where you stand please clarify what your business supplies s and how it is related to UK. VAT is only applicable if you doing business in UK or EU . Withdrawals from your investment don’t attract VAT but may attract withholding tax from US point. If you have any further questions i will kindly assist. General reference on whether you are required for VAT registration is very straight forward on this site: http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#1
Hi, I am still not clear as to what money in the LLC will get taxed in the UK? Just the money that I bring across to the UK? Or also money that is just sitting in the US bank account? I realise that all the profit in the LLC will be taxed in the US.
There is a lot of confusion as to the treatment on the treat United Kingdom tax resident taxed on the LLC profits or distributions and what happens to the remaining profits in LLC. Generally speaking, United States federal income tax is charged on the profits of United States limited liability companies (LLCs) on the basis that they are fiscally transparent, that is, tax is imposed on the members of the LLC and not on the LLC itself ie you are taxed on the total profits of the LLC (whether you make distributions or not) as per my earlier comment.
On the contrary, the HMRC has traditionally regarded U.S. LLC as being opaque for tax purposes. In other words a United Kingdom resident shareholder of an LLC is taxed on the basis of what is distributed from the LLC rather than the profits that arise within the LLC. Such distributions are taxed as though they are dividends. This can create various timing and double taxation problems as the two jurisdictions will rarely tax the same sum in the same tax year. This is undoubtedly an unsatisfactory area of U.S./United Kingdom taxation in which significant injustices can arise where a United Kingdom resident shareholder in a U.S. LLC could be taxed twice; firstly on profits arising in the U.S. and secondly on distributions received in the United Kingdom, without any foreign tax credit being available. For example LLC profits of $1000 would be reduced by $450 dollars in U.S. tax and $220 in United Kingdom tax resulting in an effective tax rate of 67%.
However the good thing is if you control directly or indirectly, at least 10 per cent of the voting power in the LLC, any tax paid in the US on the profits of the LLC is available for relief against UK tax. Therefore, the effect of all this is that you are liable to tax on worldwide income and gains as HMRC will tax you on that total income as if the LLC structure was not in existence.
To answer your question, generally your LLC will incur LLC US tax on its profits. If you distribute the income it may be treated as dividend and you may incur the usual dividends tax charge in UK. You may claim double taxation ie the U.S. tax paid on underlying profit of LLC is allowed as a tax credit against the United Kingdom tax liability as the LLC maybe treated as transparent for tax purposes if you control directly or indirectly, at least 10 per cent of the voting power in the LLC.
Please read this link for further references:
I will get back on VAT ASAP. Im drafting the response.
With regards XXXXX XXXXX –yes the US does not have VAT but sales tax instead but this does not seem to solve your issue. The GENERAL RULE is If ANY company sales in the UK /EU exceed £77k then they have to register to VAT and thus charge VAT. It does not matter if the company is registered in Russia, USA or the UK.
Therefore even if you have a US hosting your site, you do have to charge EU customers VAT even if you are operating your business from the USA and even if your servers are located in the USA. According to the European VAT law webhosting services are considered as provided where the customer resides if the customer is an individual. This applies even if the service is provided in the US according to civil law.
You may need to consider whether your business could benefit from the VAT Flat Rate Scheme as it may minimise the administration element.
My site generates maybe $70k per year in sales but only about 20% of those sales are in the UK. So surely I will be way under the £77k?
Just an additional comment - I can’t see any other way of avoiding VAT if your sales exceed £77k - previously companies legally avoided VAT by residing in Jersey and Guernsey and were allowed not to charge VAT if they sold items for £15 or less - that loophole has now been closed. My personal take on this is that the moving to LLC may not help with either UK personal tax or VAT. You will incur additional administration costs of LLC. You will still need to charge VAT if £77k sales. My recommendations is keep the business as it is and not to reduce your sales to EU but hire a data entry person online from India or wherever---you will pay them £500 per quarter and they can do the analysis for you and fill in the return documents. That would save you all your hassles -- a couple of my clients who prefer that way -saving them an awful lot of time. I know a couple of contacts/websites that provide established data/finance analysts to just analyse VAT data and fill in the VAT returns on a quarterly basis. If you need further assist with regards XXXXX XXXXX above or contacts, you can let me know.
To clarify, do I only need to register for VAT when my sales of taxable supplies is more than £77k? That is what I read online somewhere? If that is true then only a small percentage of my sales are subject to VAT. Probably less than £20k
My site generates maybe $70k per year in sales but only about 20% of those sales are in the UK. So surely I will be way under the £77k?Sure i missed this earlier - if your sites generates $70k you dont need to register for VAT. Yes thats way below £77k. Besides only the portion relating to EU is $20k far below teh minimum required for registration. Therefore you dont need to charge VAT nor register.JACUSTOMER-5z6z37qi-41087.4881018171
Chartered Accountant >20 years + Qualified IFA
Are you answered?? Let me know if you have any further concerns...
Thanks very much. A positive feedback would be greatly appreciated.
Thanks. Yes all answered and rated as good service, thanks
You are welcome.cheers XX XXX need any further help, do not hesitate to contact me.