In this episode of US-UK Tax Talk, Aidan Grant is joined by Alex Straight, Partner in the US team at Blick Rothenberg, to discuss the tax and practical issues that arise when entrepreneurs and business owners run a business cross-border between the UK and the US.

Aidan and Alex explore what happens when a US business owner moves to the UK and continues to manage or work for their business. They discuss central management and control, permanent establishment risk, and why a US company can accidentally become exposed to UK corporation tax, reporting obligations and Companies House disclosure requirements.

The conversation also covers the use of UK subsidiaries, branches and employer of record arrangements, as well as payroll, PAYE, National Insurance and social security considerations for employees working across borders. Alex also explains why non-cash remuneration, share awards and deferred compensation can become particularly complicated when employees move between the US and the UK.

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Key Takeaways

When should business owners start planning before moving to the UK?

Ideally, planning should begin before the move takes place. Business owners need to understand not only their personal UK tax position, but also whether their activities could affect the tax residence, reporting obligations or structure of their business.

What is central management and control?

Central management and control looks at where the real strategic decision-making of a company takes place. If a US company is effectively managed and controlled from the UK, HMRC may treat it as UK tax resident.

Why can central management and control be a problem?

If a US company becomes UK tax resident, it may need to register in the UK, file accounts, disclose directors and beneficial owners, and potentially pay UK corporation tax. The US-UK tax treaty does not contain a simple corporate residence tie-breaker, which can create double tax risk.

What is a permanent establishment?

A permanent establishment can arise where a non-UK company carries on substantive business activity in the UK. This may include generating revenue, concluding contracts or having a dependent agent operating in the UK on behalf of the business.

Why might a UK subsidiary be useful?

A UK subsidiary can help ring-fence UK activity, manage local tax and reporting obligations, and limit the exposure of the wider US business. It can also provide a clearer structure for employees, customers, VAT, payroll and local compliance.

What employment issues arise when someone works in the UK for a US business?

Even where there is no UK subsidiary, a US employer may still need to consider UK payroll, PAYE, National Insurance, pensions and HR obligations if an employee is working from the UK. Employer of record arrangements may sometimes be used to manage these obligations.

How can National Insurance and US Social Security interact?

Employees working in the UK may be subject to UK National Insurance, although in some cases a certificate of coverage may allow them to remain within the US Social Security system for a period. This needs careful planning, especially for people moving later in their careers.

Why do share awards and deferred compensation create extra complexity?

Non-cash remuneration such as stock awards, RSUs and deferred compensation can be taxed differently in the US and UK. The tax treatment may depend on where the employee was working during vesting periods, what elections were made, and how the employer reports the award.