Income from royalties already taxed in the US...

[bobcat7]

Hi,

I am an artist, with an income of around £16000 before taxes. Part of my income is from royalties through an agent in the US. The US government keeps 30% tax from these royalties. (I've been trying to get an ITIN number for the US, in order to become exempt from the US withholding tax – but it's a rather complicated process.)

Anyway.... my question is:
Do I need to declare this royalties-income to the HMRC, even if it's already been taxed in the US?
So to have it taxed a _second_ time here in the UK? I hope not...

Thank you for your help!

[DavidTreitel]

The withholding tax in the United States is just tax; it is fully refundable.

As a consequence you will need an ITIN and to file a US tax return to reclaim the US tax withheld. The UK will not give credit for a refundable tax. Incidentally we are a Certifying Acceptance Agent authorised by the IRS to assist clients obtaining ITINs. More details on that can be found below.

Do you need a Certifying Acceptance Agent in London to get an ITIN?

What is an ITIN?
An ITIN, or Individual Taxpayer Identification Number, is issued by the United States Internal Revenue Service (IRS).

This number is only issued to people who do not have and do not qualify for a US Social Security Number (SSN). The main purpose of an ITIN is for individuals who are not US citizens or residents to be able to report US source income and file US tax returns. It can also be used by US citizens to apply for identifying numbers for spouses or children.
In most cases, the IRS will expect an ITIN application to be submitted with a US tax return.

An ITIN does not give permission for working in the United States or to open a bank account or carry out business within the United States. Its primary purpose is to assist US tax returns and tax withholding forms (such as IRS Form W-8BEN) to be accurate.

How do I apply for an ITIN?

To be able to file any US tax return at all, someone who does not have an existing SSN or ITIN will need to complete and file an IRS Form W-7 and apply for an ITIN.

The IRS accepts ITIN applications in person at its Embassy in London; at some other IRS offices, by mail, or through an IRS Acceptance Agent. The IRS does NOT take online applications.

If a Certifying Acceptance Agent is not used, the Form W-7 will need to be filed with any relevant US tax forms; and an original passport as proof of identity. These documents can be mailed to the IRS ITIN Unit in Austin, Texas or taken in person to an IRS office.

What does a Certifying Acceptance Agent actually do?

As a Certifying Acceptance Agent, American Tax Returns Ltd is authorised to review original identification documents such as passports; and to assist with the ITIN application Form W-7. American Tax Returns Ltd also prepares US tax returns that (with some exceptions) will need to be sent with an ITIN application.

We are authorised by the IRS to certify that Forms W-7 are complete and correct, check the forms in detail and send a certified copy of a passport to the IRS. Given that more than half of W-7 Forms filed during 2013 were rejected by the IRS ITIN Unit; and that using a Certifying Acceptance Agent avoids mailing original documents to the IRS or visiting a US Embassy; many clients think that it is worth paying a fee for our services in assisting them obtain an ITIN.

What are the next steps?

To prepare a W-7 Form, our agreement with the IRS requires that we either have to meet in person or have a meeting via video or Skype. Under the terms of that agreement with the IRS we are required during that discussion to have sight of an original passport (or alternatively a copy certified by the Passport Office). Copies of passports certified or notarized or with an apostille are simply not accepted by the IRS, unless the copy is certified by the issuing agency. In practice this means that we invariably need to have seen an original passport and that we meet in person with the majority of clients who require us handle W-7 Forms. As Certifying Acceptance Agents we carefully check the documents, prepare a Certificate of Accuracy that substantiates an ITIN applicant’s foreign status and identity and file the documents with the IRS on behalf a client. We also follow up with the IRS where required.

Once filed with the IRS, it usually takes between 4 and 8 weeks to receive an ITIN in the mail.