Where you are not a US citizen and have money from the US is Why you need to complete form W8. This money could be from your clients, pension income, royalties, dividends, capital gains – you get the picture.

Who must complete the W8 form?

Most importantly, it applies to anyone who is not a U S citizen who does not have a permanent establishment in the U S. For example, if you are an individual, sole trader, company or even a charity, not for profit then you must complete form W8.

Firstly, there are two main variations of the form W8. Form W-8-BEN for individuals and sole traders, and W-8BEN-E is for companies, partnerships, charities, and corporations.

This weeks’ I Hate Numbers podcast focus is on the W-8BEN form.

What is the purpose of the W-8BEN form?

Great question. The IRS form must be given to your US client or payer, otherwise they will deduct 30% withholding tax! Before payment is made to you, they must establish who you are, what your tax status is, and whether withholding tax applies to your situation.

I will talk you through what goes into the W-8BEN form. You cannot complete a tax form without getting a headache over jargon. My mind also wanders to George Bernard Shaw who said that The United States and Great Britain are two countries separated by a common language.,

I have you covered. I will translate the official speak, talk US-UK tax treaties and TINs. Fancy seeing what a completed form looks like, click the link to see a video visual.

You need to complete the form to stop 30% tax withheld at source. You don't want this!!. Remember, you still must report this and account for it in the UK, but we're talking about preventing withholding tax being applied.

What next

In conclusion. If you do not complete the W-8BEN form you will have 30% tax stopped at source, which is not what you want. I hope you found this podcast useful. Help me share Number Love by telling your friends and family about the show. Listen now and Subscribe to I Hate Numbers, so I can send it straight to your inbox every week with all the latest updates from I Hate Numbers podcast! are

My news section, FREE online calculators are there for you. Just click here now to get started!

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If you've got clients in the US, you do business with the US, you are a YouTuber perhaps, you've got money or income that you generate from the US, and you're not a US citizen, then you need to complete form W-8 to comply with the IRS rules.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. My name is Mahmood. I'm an accountant of over 26 years who's been helping businesses of all sizes, shapes, and complexities make profits, save tax, save time, improve their money mindset, and have the business lifestyle they desire. Now, in the short broadcast, I'm going to be talking about the who, the why, and the how of compliance.

I've got a working example also that I'm going to be talking through of a completed form W-8, what goes in there, and the boxes we need to fill. Now, first question, who does the form W-8 apply to? Well, it applies to anyone who's not a US citizen, who doesn't have a permanent establishment in the US. If you're an individual, you're a sole trader, you're a company, or even a charity, then you must complete form W-8.

Now, there are two main variations of the form W-8. They are, wait for it, W-8BEN and a W-8BEN-E. Don't tax authorities just love their reference numbers? Now, the first one, the one that I'm going to be talking through in this short podcast is the W-8BEN, which is aimed at individuals and sole traders.

The other form that I mentioned, which I'm going to be talking about in next week's podcast, is the W-8BEN-E. Now, critically, if you're an individual who has income from the US and maybe whether that's pension income, royalties, whether you are self-employed, what we might call a sole trader, and you've got clients in the US, and you haven't got an office, a fixed establishment there,

then you need to complete the W-8 bank form. Now, you might be asking yourself, why should you complete the form? Well, it's simple. If you don't complete the form, then your customer, your payer, will have to keep back 30% tax, which is what's called withholding tax. That's a little bit of a financial ouch.

Secondly, it's the law. Failure to do so means the IRS, which is the US equivalent of our HMRC in the UK, will get upset with the US company, which typically means fines, penalties, and a big slap on the rest. So, it's an obligation placed on the US payer. Now, in this podcast, I'm going to focus on the W-8BEN, as I said, which is aimed for individuals and the self-employed.

Next week, I'll look at the W-8BEN-E form. That's a slightly wordy document at 30 sections. It's heavier going compared to the W-8BEN. Okay, let's dive in. Now the form W-8BEN is there to establish your status, whether you are in fact a non-US citizen and you've got income arriving

from the US. Now, part one of the form relates to you as the individual and establishing you as what's called the beneficial owner of that income. So, do you have legal entitlement to that income? Is it yours? So, typically they're going to ask for your name. Use the name as listed on your passport or your driving license.

Do not use nicknames. Do not use abbreviations, and I suggest at the beginning you add a salutation. So, if it is being completed for myself, it would be Mr. Mahmood Reza. Question two in part one is talking about citizenship, which is effectively your tax residency. Now, if you are from England, Scotland, Ireland, and Wales,

your tax residency is designated as United Kingdom. Do not use abbreviations, and United Kingdom is the designated residency that covers all those four countries. Number three, you list your normal residential address. Put down the four details. Also include the postcode and make sure a full name and details are provided with no abbreviations.

If you are self-employed and you have a different trading address from your residential address, make sure you note that as well. So far, so good. Now, we come to what's called the killer question that typically a lot of individuals find. Now, I'm talking about the form from a UK perspective. This W-8BEN form, by the way, is given to any non-US citizen.

So, wherever you are in the world, if you've got income from the US, this form will be completed. It's the same, and I'm obviously using UK credentials. Now the killer, the one that causes a problem is what they refer to as the TIN, the T I N. This is the tax identification number. Now, in the UK we're not used to

this language of a TIN. A TIN is not actually normally given to us on our passports, our driving license and documentation, but effectively it is one of two numbers. Now, the TIN, as I'm going to explain to you, is recognized by the OECD and it is as follows. It's either your national insurance number or it is your UTR, which stands for Unique Tax Reference.

Now, if you're not a sole trader and your income is in the United States, perhaps you've got some pension income, perhaps you're earning royalties, perhaps you've got some rental property, and you're not a US citizen, then use your national insurance number. If you are registered as self-employed in the United Kingdom,

and you've got clients in the US, then I would suggest you put your UTR in, your unique 10-digit tax reference. So, national insurance number for the self-employed not, and the 10-digit tax reference if you're self-employed. Does it make a lot of difference if you use a different one? Not necessarily, but my recommendation would be National Insurance Number

Or UTR. Now, as we proceed on with the form, it'll ask you for the date of birth. It seems quite straightforward, but be very careful and make sure you adopt the US notation for date of birth. Typically month first, then day of the month, and then year, giving us four digits. Quite easy to forget and we use the UK format. Again,

if you do that, the form will be wrong and it'll be rejected. Use the US format. Now, we're nearly on a home stretch here, so let's talk about part three of the form. And this is again, another head scratch situation, and we now go into what we call tax treaties. Now, let me take a slight pause from Form W-8 and let me just briefly explain what tax treaties are, what the relevance is.

Now, every single country in the world, if you imagine this idea, we may be resident in one country for tax purposes, but we may have income arising in another country. So, countries agree with each other: how they are going to treat that income that arises from a non-resident, who gets further steps, what tax rate will be applied, and if it's going to be taxed in the country in which the income is generated.

Now, we are going to focus on the US/UK Treaty. But if you feel suitably inclined, you'll find that the UK has many, many, many treaties pretty much everywhere in the world. The two governments, the two tax authorities will agree with each other. We're focusing on the US/UK Tax Treaty. If you're a non-US resident

who's got income in the US, then you need to refer to your own country’s tax treaty with the United States. Now, the purpose, as I said, is how to tax non-residents, non-tax residents, who gets taxing rights, what rates apply, and how it's dealt with. Now, within the tax treaty, you've got types of income, that’s your reference, and they're under the heading of what are called articles.

So, for example, if you've got a property in the United States, that property income comes under Article 6. If you've got business clients in the US, those business profits come under Article 7. If you generate dividends in the US, maybe you're an investor, maybe you've got a pension scheme out there,

dividends will come under Article 10. If you've got royalties, generating perhaps from a YouTuber situation, perhaps you've got music that's been sold in there, that would come under article 12. Now, if you are not quite sure what applies, if you're not quite ready to read the tax treaty, make sure you speak to your accountant, speak to your advisor, or by all means, guys, fix up a time to chat with us, and we'll guide you through it. Now, within the form,

the IRS expects you to quote the articles and the income you're referring to. So, if you have business profits, you have perhaps royalties as well, you're going to quote respectfully, Article 7 and Article 12. You want to be really flash at paragraph one. Question 10 on the form asks you for the rate of withholding tax.

So, if you're a UK tax resident, then the withholding rate you want applied to your business profits, for example, is zero. Remember, this form will be given to your payer, not the IRS, and they will use that to decide what level, what amount of tax they're going to withhold from you accordingly. Lastly, we come down to the signature box.

Print your name, date the form, use the US format, remember. If you are completing this form on behalf of somebody else, then make sure you note that accordingly. So, folks, I hope you found this useful. It might sound a bit daunting, but remember, it's absolutely critical issue that if you do business with the US,

you've got to complete the form accordingly. It's now a manager requirement, certainly from YouTube, from Google, that you've got to complete this one. If you don't complete it, you'll have 30% tax stopped at source, which is not what we want. Remember, you still have to report this and account for it in the UK, but we're talking about preventing withholding tax being levied in the US. Now,

I hope you found this useful. Next week we're going to look at the company format, the company form. We're going to drill down there. If you fancy having a look at a visual, what this form looks like, check out the website. It's in the show notes there, and I've got a video recorded with a visual representation of the completed form W-8BEN.

I'd love it if you could subscribe to this podcast. I'd even love it even more if you could share some comments. If there's things you want covered on future podcast shows, drop me a comment accordingly. Thank you very much for your company, folks. Until next week, over now. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.