How you should complete W-8 forms is a must if you do business with the US.  It’s also a must if have investments in the US or earn income in the US.  For example, you tubers, sole traders, UK resident companies, Individual taxpayers, will all come under these rules.

What are the W-8 forms?

There are five W-8 forms in total issued by the Internal Revenue Service (IRS), the US equivalent of HMRC.  These forms are for foreign businesses and individuals to complete.  The W-8 forms verify country for tax residency, and that a lower rate of withholding tax applies.

Who needs to complete W-8 Forms?

There is the W-8BEN form for individuals and the self-employed (sole traders).  The W-8BEN-E is for completion by companies, partnerships, or charities.  If you are a US citizen then W-8 BEN and W-8BEN-E doesn’t apply to you.

Why you need to complete forms W-8

Firstly, The Foreign Account Tax Act (FATCA) 2010 and the IRS says so.  Secondly, if you don’t complete and submit one to the agent or payer of your money 30% of your income will be kept from you, held back as withholding tax.  Ouch!

What goes into a W-8BEN form?

Sole proprietors and individuals fill out the W-8BEN-E form to receive payment from U.S. companies. You will be asked to provide and confirm

  • Name, address date of birth
  • Your confirmation of no US office or branch.
  • You qualify for a tax treaty that exempts you from paying tax to the IRS or reduces the tax withholding rate
  • That you are not a US resident
  • TAX Identification Number, TIN

UK resident taxpayers pay tax on your U.S. income to the IRS. But you will pay tax on that income in your country of origin

What is a Tax Identification number ?

The United Kingdom does not issue TINs in a strict sense, but it does have two TIN-like numbers for individuals.  There is the Unique Taxpayer Reference (UTR). The format is a unique set of 10 numerals allocated automatically by HMRC for both individuals and entities who must submit a tax return.

Your National Insurance Number (NINO) is your other TIN . This consists of two letters, six numbers and a suffix letter A, B, C or D (for example DQ123456C).  All individuals living regularly in the United Kingdom are either allocated or can be issued with a NINO.

For companies, the TIN is normally the Corporation Tax UTR.

Most importantly watch the video to see a completed example of the form W-8BEN.  Next week I’ll share a completed example of the form W-8BEN-E.

What goes into a W-8BEN-E form?

On the other hand companies, partnerships, and charities need to complete the W-8-BEN-E form.

However, this form of 30 sections is more involved than the W8-BEN form.  The W-8BEN-E form asks for information such as:

  • Your company name and address details
  • Where your company was incorporated, or is located
  • What your organisational status is
  • Tax Identification Number
  • You qualify for a tax treaty that exempts you from paying tax to the IRS or reduces the tax withholding rate

Where do you get the W-8 forms from?

Claims by a resident of the United Kingdom for relief from United States withholding tax under the agreement are to be made on Forms in the W8 series.

These forms are downloadable from the IRS web-site as follows:

The form, which does not require certification by an HMRC Inspector.  Send the form to the payer person in the United States who is required to withhold tax from your payments.

When do the W-8 forms expire?

The W-8 forms last until the end of the calendar year when they were signed, and then the next three years thereafter.  For example, a W-8BEN form submitted on 31 May 2021 would be valid for the rest of 2021 and for 2022 to 2024.  Furthermost, it would expire on 01 January 2025, and then must be renewed.

Conclusion

Above all I hope you found this vlog-blog useful.  Tax and forms go hand in hand, and you need to keep on top of. Whether it's trading with Europe, US or the the rest of the world, International tax impacts more of us.  Get in touch with us to see how we can help your with tax and other accounting and business matters.  For more business and finance , news, advice and tips, don’t forget to watch our weekly broadcasts, listen to our weekly podcast I Hate Numbers.

Pro Active Resolutions

The Numbers Crew- Here to help you!