UK companies doing business in the US – either directly or indirectly – may be asked by a client or customer to provide a completed W-9 or W-8BEN-E. What are these and why do they need to be completed?
A W-9 is a form completed by US citizens or US business entities and signed by a US person. It provides the requestor (usually a payor) with the information – including the payee’s employer identification number – which the payor needs to determine whether payments need to be reported to the IRS and, if so, to report them. These payment reports are made early each calendar year using Form 1099. (You will also receive a copy of what is sent to the IRS.) The IRS will compare the 1099s filed by your payors with the gross revenue reported on your tax return to determine if there has been underreporting of income.
A W-8BEN-E, in contrast, is a form completed by a non-US entity for the purpose of claiming that a payment being made to it is not subject to US tax withholding (or is subject to reduced withholding). Although the form looks complicated, only a few sections usually need to be completed. A UK company without a “permanent establishment” in the US (as defined in the US-UK tax treaty) will typically only need to complete Parts I, III, and XXV of the form. After properly completing the form, your payor should be able to pay you the full amount owed, free of any US withholding tax.
What if a UK company is operating in the US through an LLC for which no C-corporation election has been made? For reasons explained here, a UK company with a permanent establishment in the US should avoid operating in the US through an LLC, unless a C-corporation election has been made. However, for UK companies without a permanent establishment in the US, operating through a disregarded LLC (i.e, a single-owner LLC for which no C-corporation election has been made) may be an appropriate path. In this case, because the LLC is a disregarded entity and not treated under federal tax law as an entity separate from its owner, the UK owner should complete Form W-8BEN-E. The LLC should not provide Form W-9.