Contractors' Questions: What if I'm supplying a US firm from the UK?

Contractor’s Question: I'm a UK resident set up as a contract software designer in the UK with a UK registered business. But a US-based company wants to put me on a retainer to do quite a bit of work for them.

They say I've got to fill out a W-7 form and get an ITIN, but I don’t think I need to, on the basis that I'm based in the UK, registered in the UK and invoice from the UK. So is my new client right or, as I believe, do I not have to deal with the IRS?

Expert’s Answer: Based on the information you have provided and under current rules, you do not need to deal with the IRS. As all the work is being carried out in the UK, you should only be liable for tax in the country of work – i.e. in the UK. 

However, the US client may want to check with the IRS if it is liable for withholding tax on the gross contract rate. If that is the case, I feel sure that you will insist that the contractual gross figure is increased to accommodate that liability!

For your reference, an individual files form W-7 if he or she needs an ITIN (Individual Taxpayer Identification Number). The IRS uses an ITIN to identify an individual who needs to file or be included on a US tax return. 

The expert was Mike Phillips of its international, specialist consultants in tax and finance.

Editor’s Note: Related Reading –

Contractors’ Questions: How to be tax-efficient when IT contracting in the US?

Contractors’ Questions: How to start contracting in the USA?

Contractors’ Questions: Can I get my fee from a US client in pounds?