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Where Taxpayers and Advisers Meet

UK-US S-Corp (Opaque) double taxation (K-1)

Posts: 1
Joined: Mon Oct 08, 2018 5:08 pm

UK-US S-Corp (Opaque) double taxation (K-1)

Postby flyinggoose » Mon Oct 08, 2018 5:12 pm

Hi there,

Very specific question to which I haven't been able to find an answer.

I'm a UK resident with a US green card and sole proprietor of an S-Corp (Delaware).

The US taxes are straightforward, the salary comes as a W-2, the K-1 (profits) are taxed separately.

The UK taxes are more complicated. It is considered as Opaque by HMRC which means there is no tax relief for the taxes paid on the profit part of the business.

As such, would I be better off paying everything out as a salary, which even though it increases my US tax burden, it avoids double taxation and the combined tax burden would be lower?

Haven't found an answer and assuming I'm not the only one in this situation!


Posts: 195
Joined: Thu Aug 16, 2012 4:31 pm

Re: UK-US S-Corp (Opaque) double taxation (K-1)

Postby DavidTreitel » Sat Oct 13, 2018 10:54 am

An S-Corp is an extremely unusual entity choice for a UK resident. From what you describe, the corporation is UK resident (because it is managed and controlled in the UK) and therefore subject to UK corporation tax on its profits. Hopefully it has registered with HMRC and is paying UK corporation tax. As it pays a salary, it is required to operate PAYE.

As the United States is charging you to tax personally on its underlying profits and the United Kingdom will charge UK corporation tax; the overall rate of tax could turn out to be rather higher than the top tax rate in either jurisdiction.

If any of the UK compliance is overdue (as sounds likely), you will probably find it helpful to have a UK accountant negotiate with HMRC on the mitigation of penalties.

You may separately want to discuss with whoever recommended this structure why it was considered suitable for a UK resident.

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