How is a commission or referral reward from a US company taxed if you live in the UK?

The short answer for UK residents

If you are UK resident for the tax year, a referral reward or commission from a US company is generally taxable in the UK as part of your worldwide income. The fact that the payer is American, pays from a US bank or asks you for a US form does not move the income outside UK tax. You report it through Self Assessment or, if your limited company is the registered partner, within the company's Corporation Tax return.

The harder question is which kind of income it is. A consultant who regularly advises business owners will usually treat introductions as part of an existing trade, while an employee who makes one introduction on the side may have miscellaneous income instead. The category drives National Insurance, which costs you can deduct and which pages of the return you use, so settle it with your accountant before the first payment arrives.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting. This page does not link HMRC guidance, so check the current Statutory Residence Test and Self Assessment pages on GOV.UK, or ask your accountant, before relying on any UK point here.

Which UK rules decide the treatment?

Four questions cover most cases.

• Residence. HMRC's Statutory Residence Test decides whether you are UK resident for a tax year, using days spent here and your ties to the UK. Split years, recent arrivals and people with homes in two countries can be treated differently, and the rules for newcomers have changed in recent years.
• Character. Trading income, part of an existing profession, or one-off miscellaneous income. The label in the referral agreement does not decide this; what you actually do does.
• Who earns it. You personally, your limited company, or your partnership or LLP. A firm's partnership agreement may say that fees earned by partners belong to the firm.
• Timing. Rewards are paid only after the buyer pays and SourceX receives its fee, so the payment can fall in a later tax year than the introduction. Your accounting basis decides which year it belongs to.

How it applies in common UK situations

Where does the W-8BEN fit?

The W-8BEN is a US document with a narrow job. The IRS explains in its overview of Form W-8BEN that foreign individuals give it to the payer or withholding agent when asked, whether or not they claim a reduced treaty rate, and that it goes to the payer rather than to the IRS. Entities use the W-8BEN-E instead, and US persons, including resident aliens, use the W-9.

For a UK resident, three practical points follow:

1. Completing a W-8BEN reports nothing to HMRC. You still declare the reward on your UK return.
2. If your limited company is the partner, it completes the entity form; the W-8BEN-E guide for consulting firms covers the choices a small advisory company faces.
3. Whether any US tax applies at all depends on facts such as where you did the work; the US-source income question for non-residents explains why introductions made from the UK are usually treated differently from work done on US soil.

Reporting the reward through Self Assessment, step by step

1. Confirm your residence status for the tax year in which the reward is paid.
2. Agree with your accountant whether the reward is trading income or other income, and whether it belongs to you, your company or your firm.
3. Convert the payment into sterling using a documented, consistent exchange rate, such as the rate on the day of receipt or an HMRC published rate, and note which method you used.
4. If it is trading income, gather allowable costs, for example travel to meet the referred company's owner.
5. Enter the amount on the correct pages of your return and keep the evidence for as long as HMRC can ask for it.
6. If any US tax was withheld, ask whether foreign tax credit relief is available; if none was withheld, there is usually nothing to credit.

Records to keep for each payment

• Any payment statement or remittance advice you receive, with its date and amount
• The bank statement showing the sterling amount credited and any conversion or transfer charges
• A copy of the W-8BEN or W-8BEN-E as signed, and the date you supplied it
• A saved copy of the program terms as they stood when you signed up
• A short note of when and where you made the introduction
• Receipts for any costs you plan to deduct

VAT and professional rules are separate questions

Income tax is only one layer. If you are VAT-registered, the place-of-supply rules decide whether VAT applies to a reward from an overseas business; the UK VAT position on a commission paid by a US company sets that out. If you are a chartered accountant or another regulated professional, check your own code before accepting any referral fee; the IESBA Code overview on referral fees and commissions is a sensible starting point for accountants.

What you are actually reporting

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, and the reward becomes payable only after the buyer pays and SourceX receives its fee. It comes out of SourceX's fee, never out of the referred company's proceeds, and no reward is guaranteed. The referral earnings calculator shows how the published formula works, which helps you and your accountant plan before any cash arrives.

Questions to take to your accountant

• Am I UK resident for the year the reward is likely to be paid, and does any special treatment apply to me?
• Is this trading income, part of my existing profession, or miscellaneous income?
• Should I register personally, through my company, or leave it to my firm?
• Which exchange rate method should I use, and how do I record bank charges?
• Do I need to notify HMRC or my employer before the first payment?
• If I also do some of the work in the US, how does that change the US and UK picture?

Next step

If you advise owners of US companies with 50+ full-time employees at peak (contractors excluded), register as a partner, complete your W-8BEN when the payer asks for it, and set up a folder for the records above before your first introduction.