What Clients Ask
Things to Know
Taking the first step to understand the complexities and nuances of the UK and US tax systems can be challenging. As part of our mission to Explore, Educate and Protect our clients, here’s a starting point to help as you either embark on the UK-US tax systems for the first time or are facing a new challenge.
Unlike VAT, sales tax is not always charged or collected, and there is no reclaim process at the end of the year. Sales tax rules are set at the state level, meaning each state determines what goods and services are taxed.
Nexus refers to the minimum connection a business must have with a state before the state can impose tax obligations. Nexus can be created through physical presence—such as an office, property or employees — or through economic presence, which occurs when a business exceeds a state’s sales or transaction thresholds even without any physical operations.
US health insurance is often expensive, and employers rarely cover 100% of employee premiums. Businesses can choose from a variety of individual and group health plans and coverage options, but they must provide consistent, nondiscriminatory coverage across employee groups to stay compliant.
The UK has a more centralized system with fewer filing layers and unified reporting. In contrast, US accounting firms are highly specialized across tax, audit, and advisory due to a complex, multi-layered tax system, varying state-by-state compliance requirements, and the fact that US tax issues often arise early in a company’s US expansion.
There is a significant difference between what financial data is publicly disclosed in the US and UK for small businesses. In the UK, most entities are required to file statutory financial statements to Companies House, making their information public. In the US, only publicly traded companies are required to disclose financial data. Information filed with the IRS is confidential and can only be shared with the taxpayer’s consent.
In the US, this is an important decision, which should be made with guidance from trusted, experienced advisors. Key factors include owner liability protection, funding plans, tax treatment, and the business’ ownership structure.
There is no single best state to form a US entity. The right choice depends on your business model, customer base, and long-term goals. After your due diligence, consult legal and accounting advisors to evaluate each state’s liability protection, tax obligations, and compliance requirements to most suitable location for your US entity.
Processing payroll in the US can be complex. Employers typically choose from three service models:
US banks operate under strict compliance and internal-control frameworks due to the size of the market and higher fraud-risk exposure. As a result, opening a bank account typically takes longer and requires detailed reviews of ownership, control, and documentation. Electronic payments often require additional approvals and formal authorization records. Overall, US banking tends to be more costly, reflecting the heightened compliance, monitoring, and risk-management requirements.
If your UK-registered entity has a US trade or business or earns income from US sources, it may be required to file US tax returns. Depending on how the business operates in the US, your UK entity may be subject to federal tax on that income or may qualify for an exemption under the UK–US tax treaty.
When a UK entity conducts a US trade or business and has a permanent establishment (PE) in the US under the UK–US tax treaty, it becomes subject to US federal taxation. However, the treaty does not apply to state taxes. A UK business may still owe state income tax if it has tax nexus in a state, even without a PE.
The W-8BEN-E is a tax form used by foreign entities—including UK companies—to certify their non-US status and claim tax treaty benefits. When a UK entity conducts a US trade or business or earns US-source income, the US payer may be required to withhold tax and send it to the IRS. If the UK entity qualifies for a reduced or zero withholding tax rate under the UK–US tax treaty, it must provide Form W-8BEN-E to the US payer to claim the treaty benefit and lower or eliminate withholding.
In the US, C corporations pay a flat federal tax rate of 21%, while individual federal income tax rates range from 0% to 37%. State and local tax rates vary and may apply depending on where the taxpayer lives or operates.
In the US, all meals, regardless of business purpose, are only 50% deductible on your tax return. This includes meal expenses incurred while traveling, entertaining clients or for staff. Entertainment expenses, such as tickets to sporting events or shows, are wholly non-deductible for US tax purposes.
Gifts given from a company are deductible up to $25 per recipient. Items that qualify as entertainment are considered non-deductible, even if they resemble gifts. Keep accurate, detailed records– including the description, amount, and date – to support gift deductions.
US employers are not federally required to offer pension plans, though some states may deviate and mandate coverage programs. These state level requirements can widely vary, with each state setting its own specific requirements.
US income taxes are paid during the tax year, not in arrears. The IRS requires quarterly estimated tax payments, based on either the current year or prior year’s tax liability, to avoid underpayment penalties.
Apportionment is a method states use to allocate business income among the states where it has operations. Some states use a single-factor sales formula while others apply a three-factor formula to determine how much of the business profit they can tax in the state. Apportionment rules help prevent double taxation when a company does business in multiple states.
US employers are not federally required to offer pension plans, though some states may deviate and mandate coverage programs. These state level requirements can widely vary, with each state setting its own specific requirements.
Offering a relocation package to employees may be a strategic tool to help attract and retain talent. Most employer-paid relocation expenses are tax-deductible for the business but payments are treated as taxable income to the employee. Employers should work with their payroll provider to ensure these payments are properly added to wages and that the correct tax withholding is applied.
There are a variety of organizations that offer valuable information and support. View the list of organizations that DY USA is a member of to support both our firm and our clients here.
E-filing is the electronic submission of tax documents to the IRS or your State’s tax agency.
In certain cases, you may not be able to e-file tax returns. For example:
Yes, a return can be amended after filing.
In most cases, filing jointly provides the better tax outcome. Once a draft of the tax return is prepared, a calculation can be done to compare whether filing separately would be more beneficial.
If you are looking to expatriate or give back your Green Card, be aware that this is a complex area and dependent on an individual’s personal circumstances. The process involves several key steps to ensure compliance with U.S. tax regulations while living abroad.
This is the authorization form to allow us to e-file your federal tax return. Both taxpayer & spouse are required to sign.
To pay your federal tax you have three options:
For state tax, most states allow you to pay via direct debit or by check using a payment voucher, similarly to the above guidance for federal tax. Online payment is usually an option also via the state taxing authority website or online account, however specific guidance varies state by state. You will need to refer to the appropriate state’s tax authority.
There are several ways to pay your U.K. tax liability to HMRC, however the quickest and easiest method is via bank transfer. Your payment reference will be your Unique Tax Reference (UTR) followed by the letter ‘K’. You can use HMRC’s bank details below:
sort code – 08 32 10
account number – 12001039
account name – HMRC Cumbernauld
If you would like to explore other payment options or you are paying from a non-U.K. bank account, you can see more details on HMRC’s website using the following link: Pay your Self Assessment tax bill
There are a variety of organizations that offer valuable information and support. View the list of organizations that DY USA is a member of to support both our firm and our clients here. Tax Resources – DY USA
We work with US and UK accountants, tax advisors, legal firms, banks, payroll providers, and other professional service firms that support businesses expanding into or operating in the US.
No. Our goal is not to replace existing advisors but to complement them and serve as an extension of their team. We work closely with UK and other local advisors to ensure alignment across jurisdictions.
We focus on US-specific matters such as federal and state tax, compliance, reporting, and advisory. Our partners typically handle UK or local-country tax, statutory reporting, legal, or operational services.
No, we do not operate on a referral-fee model. Our priority is building long-term, trusted relationships that deliver the best outcomes for clients.
Our ideal clients are UK businesses with US activity or expansion plans who value proactive advice, clear timelines, and coordinated cross-border support.
As early as the potential US need is identified. US tax, compliance, and banking considerations often arise earlier than expected, even before revenue is generated.
Yes. Where appropriate, we are happy to introduce clients and partners to trusted professionals across banking, payroll, legal, and advisory services.
Simply reach out to discuss the client situation. We’re happy to join introductory calls, provide high-level guidance or help determine the right next steps.
*The FAQs provided are for general information purposes only and must not be treated as professional advice. The Firm does not represent that the FAQ addresses all relevant issues or is appropriate to Your particular circumstances. Accounting and tax outcomes depend on individual facts, assumptions, documentation, timing, jurisdiction, and changes in law and guidance.
