Online work to a US company - W8-BEN???
Discussion
Hi, a friend is trying to navigate getting paid by a US company.
She is a single employee/director of a UK ltd company and has run a online course with UK students, the company paying her are USA based and paying her in dollars. Their finance person has said she needs to register with the IRS/fill W8-BEN before she is paid. Her accountant hasnt any direct experience but has said be wary of registering with the IRS as they may be then wanting to tax her worldwide income!
Any advice/pointers on what she should/nt be doing? TIA
She is a single employee/director of a UK ltd company and has run a online course with UK students, the company paying her are USA based and paying her in dollars. Their finance person has said she needs to register with the IRS/fill W8-BEN before she is paid. Her accountant hasnt any direct experience but has said be wary of registering with the IRS as they may be then wanting to tax her worldwide income!
Any advice/pointers on what she should/nt be doing? TIA
Disclaimer: I am not a tax lawyer/expert.
She should not need to register with the IRS. She just needs to fill out a W-8BEN-E form (the -E version of the form is for "entities" - e.g. companies; if she were being paid as an individual, she'd need to fill out the W-8BEN version instead) and send it to the US company that will be paying her company.
The W-8BEN(-E) form simply certifies that she/her company isn't liable for US taxes. Filling one out is not a big deal - just a box-ticking exercise, albeit an essential one because, if she doesn't, the US company that's paying her/her company are obliged to withhold a certain % of the payment and send it to the IRS, and then she would have to go and claim it back from the IRS (which I can't imagine would be fun or anything other than glacially slow).
She should not need to register with the IRS. She just needs to fill out a W-8BEN-E form (the -E version of the form is for "entities" - e.g. companies; if she were being paid as an individual, she'd need to fill out the W-8BEN version instead) and send it to the US company that will be paying her company.
The W-8BEN(-E) form simply certifies that she/her company isn't liable for US taxes. Filling one out is not a big deal - just a box-ticking exercise, albeit an essential one because, if she doesn't, the US company that's paying her/her company are obliged to withhold a certain % of the payment and send it to the IRS, and then she would have to go and claim it back from the IRS (which I can't imagine would be fun or anything other than glacially slow).
Edited by MadCaptainJack on Thursday 8th April 11:22
C350Akra said:
She needs to be invoicing them in GBP, then it is their problem not hers. She operates a UK company operating in the UK, therefore should not need to register in the US.
Half of that is true!It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
However, assuming the arrangement was business to business then you are right in that there is no obligation on the UK company to register anything with the US tax authorities. All obligations on this rests with the client. It may be different if it was a personal assignment but as the work was done in the UK, I don't see how.
StevieBee said:
It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
Agreed. However, if she just gets the USD sent to her company's regular UK bank account, they'll convert it to GBP at a s
tty exchange rate (effectively taking ~3% of the money), so she should look into a service like Wise (formerly known as Transferwise). StevieBee said:
Half of that is true!
It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
However, assuming the arrangement was business to business then you are right in that there is no obligation on the UK company to register anything with the US tax authorities. All obligations on this rests with the client. It may be different if it was a personal assignment but as the work was done in the UK, I don't see how.
For a small UK company I would not expect to have to invoice in a foreign currency, I would quote and invoice in GBP. Done this many times in the past.It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
However, assuming the arrangement was business to business then you are right in that there is no obligation on the UK company to register anything with the US tax authorities. All obligations on this rests with the client. It may be different if it was a personal assignment but as the work was done in the UK, I don't see how.
C350Akra said:
StevieBee said:
Half of that is true!
It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
However, assuming the arrangement was business to business then you are right in that there is no obligation on the UK company to register anything with the US tax authorities. All obligations on this rests with the client. It may be different if it was a personal assignment but as the work was done in the UK, I don't see how.
For a small UK company I would not expect to have to invoice in a foreign currency, I would quote and invoice in GBP. Done this many times in the past.It's normal - standard even for a UK company to be required to invoice a foreign client in whatever currency the client requests. Dollars, Euros or whatever are paid into the UK account and exchanged at the point of receipt.
However, assuming the arrangement was business to business then you are right in that there is no obligation on the UK company to register anything with the US tax authorities. All obligations on this rests with the client. It may be different if it was a personal assignment but as the work was done in the UK, I don't see how.
trickywoo said:
I run a very similar business and have filled out a few w8-Ben forms over the years.
It’s not a big deal.
Not an issue if you're a ltd company, as a partnership or other non corporate entity it's a big no ... you have to register personally with the IRS !It’s not a big deal.
As a partnership, we just uplift our daily rate when working on-site in the US and the client deducts 30% and sends it to Unlce Sam.
Only an issue if you supply services in the US and it's invoiced to a US based company ... for other customers, we invoice a sister companies elsewhere in the world to avoid the withholding tax. They save the 30% uplift and just cross charge it between their companies.
sgrimshaw said:
Not an issue if you're a ltd company, as a partnership or other non corporate entity it's a big no ... you have to register personally with the IRS !
As a partnership, we just uplift our daily rate when working on-site in the US and the client deducts 30% and sends it to Unlce Sam.
Only an issue if you supply services in the US and it's invoiced to a US based company ... for other customers, we invoice a sister companies elsewhere in the world to avoid the withholding tax. They save the 30% uplift and just cross charge it between their companies.
Whoah, whoah, whoah!!! Hold it right fAs a partnership, we just uplift our daily rate when working on-site in the US and the client deducts 30% and sends it to Unlce Sam.
Only an issue if you supply services in the US and it's invoiced to a US based company ... for other customers, we invoice a sister companies elsewhere in the world to avoid the withholding tax. They save the 30% uplift and just cross charge it between their companies.
king there!First, you clearly don't know what you're talking about. Two, you are conflating two entirely different issues.
From what you've posted here, the reason you "have to register personally with the IRS" is because (a) you're operating through a partnership, and therefore the IRS considers that the beneficial recipients of the US-sourced income are the partners (i.e. they don't view the partnership to be its own "entity" in the same way that a company is), and more importantly (b) you are "working on-site in the US", which means that the income you receive from that work is classed by the IRS as Effectively Connected Income, which is a whole other ball of wax, and subject to US tax withholding. In order to claim it back, you have to register with the IRS.
If you were operating as a partnership but not working on-site in the US, you (and the other partners) would fill out individual W-8BEN forms, and there would be no withholding requirement, and no need to register with the IRS.
If you were operating as a company and working on-site in the US, the income would be subject to withholding, and the company (but probably not the individuals) would need to register with the IRS to claim the withheld income.
The OP's question relates to "a single employee/director of a UK ltd company" who "has run a online course with UK students". This is a completely different scenario to yours (sgrimshaw's), and unless they've left something out, it's clear that no work was performed in the US, therefore, the income is not effectively connected.
MadCaptainJack said:
Whoah, whoah, whoah!!! Hold it right fking there!
First, you clearly don't know what you're talking about. Two, you are conflating two entirely different issues.
As you stated in an earlier post you are not a tax expert.king there!First, you clearly don't know what you're talking about. Two, you are conflating two entirely different issues.
I know exactly what I am talking about.
To complete a W8-Ben as an individual or a partnership you need to register with the IRS to get an id number. I can't remember the exact name of the number and due to the attitude of your post I can't be f
ked to check. BobToc said:
Have done my W8-BEN for years and never had to have any interaction with the IRS. I don’t know what the impact is for companies, but as an individual it’s just reduced my withholding taxes.
Same. I have a personal US based investment account - I have to renew the W8-BEN every 3yrs, but that’s it.As a ltd company most of our income for work done in the UK comes by invoicing US companies and is paid to our UK based dollar account. I’ve never heard of us being asked for W8-BEN forms and I’ve entirely handled some of the relationships myself.
I wonder if the US company realise they’re paying a company - perhaps they think she’s an individual? On the face of it the notion is ridiculous - it'd make it really awkward for US companies to buy stuff from outside the US.
Edited by Sheepshanks on Monday 12th April 09:29
The OP just needs to complete the form using the details
of the UK LTD company. It is difficult/confusing to fill out 100% correctly if you don’t know what you are doing. A basic thing is just knowing that US TIN = UK UTR for example as well as all the other bits to the form including the schedule of the tax act to quote.
It is a compliance thing for US businesses so they can claim to have correctly not deducted tax when paying.
Much confusion in the post with people claiming currency makes a difference to tax treatment which it doesn’t etc
of the UK LTD company. It is difficult/confusing to fill out 100% correctly if you don’t know what you are doing. A basic thing is just knowing that US TIN = UK UTR for example as well as all the other bits to the form including the schedule of the tax act to quote.
It is a compliance thing for US businesses so they can claim to have correctly not deducted tax when paying.
Much confusion in the post with people claiming currency makes a difference to tax treatment which it doesn’t etc
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