Tax Laws for UK Podcasters in the USA

As a UK podcaster or content creator, inviting guests from the USA can expand your audience and bring fresh perspectives to your show. However, these collaborations can have tax implications.

Let's look at the US Substantial Presence Test and the Closer Connection Exception - two key concepts you need to understand to keep your podcast thriving without breaking tax laws.

What is the Substantial Presence Test?

The US Substantial Presence Test helps the Internal Revenue Service (IRS) decide if you're spending enough time in the US to be considered a US resident for tax purposes. 

You might be thinking, how does that work? Well, it's not just about counting days - there's a formula involved. Imagine you're doing a series of interviews with American guests, traveling between the UK and the US. Each day you spend in the US counts towards this test.

How to Calculate the Substantial Presence Test

Here's how it works: The IRS looks at your time in the US over the past three years. They count all the days from the current year, one-third of the days from the previous year, and one-sixth of the days from the year before that. If the total is 183 days or more, you might be considered a US resident for tax purposes. This could mean you'd have to report your worldwide income to the IRS, not just what you earn in the US.

Even partial days count as full days under this test. For example, if you arrive in the US at 11:59 PM, that still counts as a full day. Some days may be exempt, like if you're in the US because of a medical problem that happened while you were there.

The Closer Connection Exception to the Substantial Presence Test

Don't worry if you're close to or over that 183-day limit. There's a possible way out called the Closer Connection Exception. It's like telling the IRS, "I may be spending a lot of time in the US, but my real home is still in the UK." To qualify, you need to show that your main ties - things like your permanent home, family, and business activities - are still in the UK.

If you need to use the Closer Connection Exception, you'll have to file Form 8840 with the IRS. This form is how you prove that your main ties are still to the UK. You'll need to provide information about your home, family, personal belongings, and where you do your business. 

To claim the Closer Connection Exception, you'll need to show things like:

• Your permanent home is in the UK
  
  
• Your family is in the UK
  
  
• Your personal belongings, like cars or jewellery, are in the UK
  
  
• Your social, political, cultural, or religious ties are in the UK
  
  
• Your business activities are mainly in the UK

Understanding international tax laws can be tricky, but knowing these concepts can save you a lot of trouble later. It's about making sure you can focus on creating great content without worrying about surprise tax bills. If you need professional tax advice or help complying with US tax laws, we’re here to support you. 

Practical Scenarios for UK Podcasters

Let's look at some real-life situations you might face as a UK podcaster or content creator:

1. Bringing US guests to the UK

If you're hosting American guests in your UK studio, you're generally fine. The time they spend in the UK doesn't affect your US tax status. But be aware of any payments you make to them, as there might be withholding requirements.

2. Frequent travel to the US for content creation

This is where things can get complicated. If you're spending a lot of time in the US - maybe doing in-person interviews or working with US creators - you need to keep track of your days. Use a calendar or an app to log your time in the US accurately.

3. Virtual collaborations

Even if you're not physically in the US, earning income from US sources (like sponsorships or ad revenue) could have tax implications. It's important to know how to report these earnings in both the UK and the US.

Documentation and Compliance: Keeping Your Records Straight

Keeping good records is really important. Save receipts, travel documents, and any contracts related to your podcast work in the US. If tax authorities ever ask questions, having this documentation will make things much easier.

Think about using digital tools to help track your travel days and income sources. Many apps can automatically log your location and help sort your earnings. This can be super helpful when it's time to file your taxes or having to answer questions from tax authorities or your accountant. 

Tax Implications for UK-Based Content Creators

Even if you're not classified as a US resident for tax purposes, you might still have some US tax obligations if you're earning money from US sources. This could include fees from US sponsors or revenue from US listeners. The good news is that the UK and the US have a tax treaty that helps prevent double taxation.

In the UK, you'll need to report your worldwide income, including any earnings from your US activities. Getting professional tax advice can be helpful in making sure you're following both UK and US tax laws.

It's important to understand things like withholding tax, which might apply to payments you get from US sources. Sometimes, you might need to get a US Individual Taxpayer Identification Number (ITIN) to properly report your income and claim any treaty benefits. 

Strategies for Managing Cross-Border Collaborations

To make your international podcasting adventures easier, try these strategies:

1. Plan your US trips carefully

Try to spread out your visits to avoid hitting the Substantial Presence Test limit.

2. Use technology

Consider doing some interviews remotely to reduce your time in the US.

3. Keep separate business accounts

This makes it easier to track your US-sourced income.

4. Talk to a tax professional

They can help you organise your activities in the most tax-efficient way.

5. Stay informed about tax law changes

International tax laws can change, so make sure you know about any new rules that might affect your podcasting business.

6. Think about setting up a business entity

Sometimes, operating through a limited company might offer tax advantages and simplify your international operations.

Conclusion

As a UK podcaster or content creator, working with US guests and audiences can open up exciting opportunities. By understanding the US Substantial Presence Test and the Closer Connection Exception, you can confidently expand your reach without getting caught up in tax troubles.

Tax laws are complicated and can change often. Don’t worry, Capture Accounting is here to help. We offer personalised advice catered to your specific situation, or if you would like to learn more about general tax issues, we’re here to help. To get in touch, book a call with us today.