Dual National US UK: US Board Fees, UK-Resident Directors

A Dual national US UK director who lives in Britain and sits on a US corporation's board reports the fees twice: to the IRS as self-employment income on Schedule C, and to HMRC as earnings from an office on Self Assessment. Which country taxes first depends on where each meeting was physically attended.

That single fact — the location of the director on the day of the meeting — drives the treaty analysis, the foreign tax credit on both returns, the state tax exposure and most of the errors we are asked to correct. At Jungle Tax we prepare both returns for UK-resident non-executives of US companies, and this guide sets out how the two filings should be built, how equity retainers change the timing, and how missed years are brought current. It is the mirror image of our guide to UK board fees received by US persons; here the company is American and the director is in London.

How are US board fees taxed when the director lives in the UK?

Three separate regimes apply to the same fee, and each asks a different question.

• US federal income tax asks whether you are a US citizen. If you are, the whole fee is taxable in the United States wherever the meeting took place, because citizens are taxed on worldwide income.
• UK income tax asks whether you are UK resident. If you are, the whole fee is taxable in the UK as earnings from an office, wherever the company is incorporated and wherever the meeting took place.
• Social security asks which single country's system covers you. That is decided by the US-UK social security (totalisation) agreement, not by the income tax treaty, and it produces a different answer from either income tax regime.

Both countries therefore tax 100% of the fee in the first instance. Relief comes afterwards, through credits, and the order in which the credits run depends on the treaty. That ordering is the part most often done wrongly.

The US return: self-employment income, not wages

Form 1099-NEC and the onboarding form that causes the first error

For federal tax purposes a director is not an employee of the corporation in respect of board service. The fees are nonemployee compensation, reported by the company in box 1 of Form 1099-NEC, with no federal income tax or payroll tax withheld. A copy goes to the IRS, which matches it against the director's return.

The first error usually happens before a dollar is paid. A UK-resident director with a London address and a British passport is frequently sent Form W-8BEN by the company secretary, on the assumption that anyone living abroad is a foreign person. A US citizen cannot sign it: the form certifies, under penalties of perjury, that the signatory is not a US person. The correct onboarding form for a dual national is Form W-9. Where a W-8BEN was signed, the company will typically have withheld 30% on fees for meetings attended in the United States and reported them on Form 1042-S rather than Form 1099-NEC. The withholding is recoverable as a credit on Form 1040, but the certification needs to be replaced and the history explained rather than left on file.

Schedule C, expenses and estimated tax

Board fees belong on Schedule C as gross receipts of a trade or business. They are not wages, and they are not "other income". Reporting them on the other-income line is the second most common error we see, because it silently removes the fee from the self-employment tax computation.

Schedule C treatment has one advantage. Ordinary and necessary costs of the directorship that the company does not reimburse — unreimbursed travel to meetings, professional subscriptions, the cost of personal advice on the appointment — are deductible against the fee. The UK rules for expenses of an office are considerably narrower, so the net figure taxed in each country will often differ. That is correct, not an inconsistency to be forced into agreement.

Because nothing is withheld, the director is responsible for quarterly estimated tax payments. A UK resident with substantial UK tax available as a credit may owe little federal income tax, but the estimated tax rules still need to be worked each year rather than assumed away.

Self-employment tax: the 15.3% that foreign tax credits cannot touch

Net earnings from board service are subject to US self-employment tax under the rules the IRS summarises in its guidance on self-employment tax for businesses abroad. The headline rate is 15.3%: 12.4% Social Security up to the annual wage base ($184,500 for 2026) and 2.9% Medicare on all net earnings, with a further 0.9% Additional Medicare Tax above $200,000 for a single filer, $250,000 for joint filers and $125,000 for a married person filing separately. The charge applies once net earnings reach $400.

Two points matter for a UK resident. First, living abroad makes no difference: a US citizen pays self-employment tax on the same basis in London as in New York. Second, neither the foreign tax credit nor the foreign earned income exclusion reduces it. A return that shows a perfect foreign tax credit and no federal income tax can still carry a five-figure self-employment tax liability. Only the totalisation agreement removes it.

Does the totalisation agreement remove US self-employment tax?

In most cases, yes — but only with the right document. The US-UK social security agreement exists so that one period of work is covered by one country's system. For a person treated as self-employed, coverage follows residence: a self-employed person resident in the UK is covered by the UK system and exempt from the US one.

The exemption is not self-executing. The IRS states in its guidance on totalization agreements that an individual claiming exemption from US Social Security and Medicare taxes must secure a certificate of coverage from the social security agency of the country whose system applies. For a UK-resident director that agency is HMRC. A copy of the certificate is attached to the US return each year, and Schedule SE is omitted on the strength of it.

The characterisation mismatch nobody mentions

Here the two systems do not line up neatly. The United States regards a director as self-employed. The United Kingdom regards a director as the holder of an office, and office-holders are "employed earners" for National Insurance purposes. So the certificate that exempts US self-employment tax has to be obtained from an authority that does not consider the individual self-employed at all in respect of this income.

In practice this is resolved by explaining the facts in the application: UK residence, the nature of the appointment, where duties are performed and the US classification of the fee. What cannot be done is to claim the exemption on the US return without a certificate, on the footing that the UK "obviously" has coverage. On examination, an exemption with no certificate behind it is simply unpaid self-employment tax plus interest.

The National Insurance position

UK coverage is not a free pass; it means UK contributions law applies. A US corporation with no place of business in the UK is generally outside the secondary (employer) Class 1 charge, so no employer contribution arises. The director, being resident and present in the UK, can still be liable for primary Class 1 contributions on the fees, paid direct to HMRC rather than through a payroll the company does not have. For the 2026-27 year the main primary rate is 8% up to the upper earnings limit of £50,270 and 2% above it.

For a director whose other UK earnings already exceed that limit, the practical trade is a 2% UK charge in exchange for relief from a US charge of up to 15.3%. For anyone holding board seats on both sides of the Atlantic, the certificate of coverage is frequently the single most valuable piece of paper in the file. The precise contributions position depends on where the duties are carried out and how the appointment is structured, and should be confirmed for each seat rather than assumed.

Is it Article 16 or Article 15 of the US-UK treaty?

It is Article 15. The OECD Model Convention numbers its directors' fees provision as Article 16, and that number is repeated throughout generic commentary. In the 2001 convention between the two countries — published by HMRC with its UK/USA double taxation convention documents — Article 14 deals with income from employment, Article 15 with directors' fees and Article 16 with entertainers and sportsmen. A treaty disclosure or a letter to either authority that cites Article 16 for board fees is citing the wrong provision.

What Article 15 actually says

The wording is narrower than the OECD model and narrower than most summaries suggest. Directors' fees derived by a resident of one country for services rendered in the other country, in the capacity of a board member of a company resident in that other country, may be taxed in that other country.

Two conditions therefore have to be met before the United States obtains a treaty taxing right over a UK resident's fee: the company must be a US resident, and the services must be rendered in the United States. A fee for a meeting attended by video link from a study in Kensington satisfies the first condition and fails the second.

Why this matters to a US citizen, who is taxed anyway

A dual national might reasonably ask why any of this matters. The saving clause in Article 1 allows the United States to tax its citizens as if the treaty did not exist, so the IRS taxes the whole fee regardless of Article 15.

It matters because of what happens next. Article 24 sets out a special ordering rule for US citizens resident in the UK. The UK gives credit only for the US tax that the United States could have imposed, under the treaty, on a UK resident who is not a US citizen. For everything else, the roles reverse: the UK taxes first and the United States gives credit for UK tax. Article 15 is therefore the dividing line between the part of the fee where the US has the prior claim and the part where the UK has it.

Where is a board fee sourced: in the US boardroom or remotely from London?

US domestic law sources compensation for personal services to the place where the services are physically performed. The residence of the payer, the place of incorporation and the currency of payment are all irrelevant. A fee is apportioned between US and foreign sources on a basis that reflects the facts, which for directors generally means time: days spent on board business in the United States against total days spent on board business.

Issue	Meeting attended in person in the US	Meeting attended remotely from London
US source of income	US-source	Foreign-source
Treaty Article 15	Applies: services rendered in the US	Does not apply
Who taxes first	United States	United Kingdom
Who gives the credit	HMRC, for US federal income tax on that slice	IRS, for UK income tax on that slice (Form 1116)
State income tax	Possible, depending on the state	Usually none, with exceptions noted below
Foreign earned income exclusion	Not available	Potentially available, rarely optimal

Apportioning an annual retainer

Most non-executives are paid an annual cash retainer rather than a per-meeting fee, sometimes with additional retainers for chairing a committee. The retainer covers preparation, committee calls and informal consultation as well as formal meetings, so a count of meetings alone can misstate the position. A defensible apportionment uses a contemporaneous log: each board and committee meeting, where the director physically was, and a reasonable record of preparation time. The same log supports the US sourcing, the UK credit claim and any state return, so it needs to be kept once and kept properly.

Travel days deserve a decision rather than a default. A director who flies to New York on Monday for a Tuesday meeting and returns on Wednesday has spent three days in the United States for one day of meetings. Whichever method is adopted should be applied consistently across years and across both returns.

The UK return: income of an office on Self Assessment

Why HMRC taxes a fee paid by a US company

A directorship is an office. Under the UK employment income code, the earnings of an office are taxed in the same way as the earnings of an employment, and a UK resident is chargeable on those earnings wherever the duties are performed. The fact that the company is incorporated in the United States and the fee is paid in dollars into a US account does not take it outside the charge.

What it does change is collection. A US corporation with no UK presence is generally under no obligation to operate PAYE, so nothing is deducted at source and HMRC receives no real-time payroll report. The director must report the fee on the employment pages of the Self Assessment return and pay the tax through the 31 January balancing payment and payments on account. A director who has never been in Self Assessment must notify HMRC of chargeability by 5 October following the end of the tax year in which the fees first arose.

The tax-year mismatch

The US year is the calendar year; the UK year runs from 6 April to 5 April. A retainer paid quarterly will produce a different annual total on each return, and the UK has specific rules fixing when a director's earnings are treated as received, which can be earlier than the date of payment. Fees must be translated into sterling for the UK return and reported in dollars on the US return, using a consistent and documented exchange rate policy. A reconciliation of the two totals should sit in the file every year.

Foreign tax credit relief for US tax

For the slice of the fee attributable to services rendered in the United States, HMRC gives credit for the US federal income tax on that slice, claimed on the foreign pages of the return. The credit cannot exceed the UK tax on the same income. Because the UK additional rate of 45% applies above £125,140 and the top US federal rate is 37%, a higher-earning director will usually pay the US tax in full and a residual amount to HMRC.

Three limits are routinely overlooked:

• US tax on the London-performed slice is not creditable in the UK. That tax exists only because of citizenship, and Article 24 relieves the UK of any obligation to credit it. Relief is given on the US return instead.
• US self-employment tax is not creditable. It is a social security charge, not an income tax. If it has been paid because no certificate of coverage was obtained, it is a pure additional cost.
• The credit must be reduced if the US tax is later reduced. A US refund or amended return that lowers the US tax on the fee must be notified to HMRC and the UK credit adjusted.

Recent arrivals and the foreign income and gains regime

Since 6 April 2025 the remittance basis has been replaced by a residence-based regime. A director in their first four years of UK residence, following at least ten consecutive years of non-residence, may be able to claim overseas workday relief on earnings for duties performed outside the UK, subject to an annual cap of the lower of 30% of qualifying employment income and £300,000. For a recently arrived dual national attending US meetings in person, that relief interacts directly with the credit position described above and should be modelled rather than claimed by reflex.

US and UK treatment at a glance

Feature	United States (IRS)	United Kingdom (HMRC)
Basis of charge	Citizenship: worldwide income	Residence: worldwide earnings
Character of the fee	Self-employment income	Earnings from an office (employment income)
Reporting document	Form 1099-NEC from the company	None; director self-reports
Where reported	Schedule C, Schedule SE, Form 1116	Employment pages and foreign pages of Self Assessment
Tax collected at source	None for a director who has given Form W-9	None where the company has no UK presence
Social security	Self-employment tax up to 15.3%, unless exempt by certificate	Primary Class 1 National Insurance; generally no employer charge
Tax year	1 January to 31 December	6 April to 5 April
Expenses	Ordinary and necessary business expenses	Narrow rules for expenses of an office
Top income tax rate	37% federal, plus any state tax	45% additional rate

A worked example: one retainer, two slices

Take a London-resident dual national receiving a cash retainer of $120,000 from a US corporation. On a time basis, one third of the board work is performed at in-person meetings in New York and two thirds remotely from London. The figures below use flat marginal rates of 37% and 45% purely for illustration and ignore expenses and exchange movements.

• US-rendered slice: $40,000. US federal income tax at 37% is $14,800. UK tax at 45% is the sterling equivalent of $18,000. HMRC credits the $14,800 and collects the remaining $3,200.
• London-rendered slice: $80,000. UK tax at 45% is $36,000 and is paid first. US tax at 37% is $29,600, fully eliminated by a foreign tax credit on Form 1116. The unused $6,400 of UK tax carries forward on the US return.
• Self-employment tax. With an HMRC certificate of coverage attached: nil. Without one: roughly $17,000 on net earnings of $120,000, creditable nowhere.

Total income tax is $54,000 — the UK rate on the whole fee — split between two treasuries. The only genuinely avoidable cost in the example is the self-employment tax, and the only way to lose more is to claim the credits in the wrong direction and have one of them refused.

Equity retainers: restricted stock, RSUs and deferred stock units

US boards commonly pay half or more of the annual retainer in equity. The equity is compensation for the same office and follows the same principles, but timing becomes the dominant issue.

Restricted stock units

On the US return, an RSU is taxed when the shares are delivered, at their market value on that date. The amount is ordinary income, appears on Form 1099-NEC and is subject to self-employment tax on the same footing as the cash retainer. The company cannot withhold shares to cover tax for a non-employee director in the way it does for employees, so the director must fund the liability personally.

On the UK return, the award is within the employment-related securities rules because it is received by reason of an office, and the value is generally charged as employment income when the shares are delivered. The two charges usually arise on the same date, but can still fall in different UK and US tax years, and the amount must be apportioned between US-rendered and London-rendered service over the vesting period, not by reference to where the director happened to be on the vesting date.

Restricted stock and the two elections

Restricted stock — actual shares subject to forfeiture — is where the two systems separate. By default the United States taxes the shares at vesting, unless a section 83(b) election is filed within 30 days of the grant to tax the value at grant instead. By default the UK also defers the charge where the forfeiture restriction will lift within five years, unless the director and the company jointly elect, within 14 days of acquisition, to be taxed up front on the unrestricted value.

These are different elections, made to different authorities, on different deadlines, and neither tax authority treats the other's election as having any effect. Making one and not the other puts the income in year one in one country and in year three in the other. Credits can sometimes still be matched across years, but the exercise is delicate and the cash-flow cost is real. Both elections should be considered together before the grant is accepted.

Deferred stock units paid on leaving the board

Some boards allow directors to defer settlement of equity until they step down. US income tax and self-employment tax then arise at settlement, often as a single large amount covering many years of service. If the director's residence has changed in the meantime — a move to or from the UK part-way through the deferral — each country will look back across the whole earning period. The service log described earlier is what makes that apportionment possible a decade later.

After vesting

Once the shares are owned outright, later growth is a capital matter in both countries. The US basis is the dollar value taxed as income; the UK base cost is the sterling value taxed as income. Because the two are measured in different currencies, the gain on eventual sale will differ on each return, and a disposal can show a gain in one country and a loss in the other.

Do US states tax a UK-resident director?

They can, and the income tax treaty offers no protection, because it covers federal income tax only. States apply their own sourcing rules to non-resident directors, and those rules are not uniform.

• Meeting-location states. New York apportions a non-resident director's fees by reference to board meetings attended in the state as a proportion of all meetings attended. Pennsylvania treats fees for meetings held in the state as Pennsylvania-source, and companies may be required to withhold.
• California. The Franchise Tax Board has ruled that a non-resident independent director's compensation is sourced not to the meeting location but to where the benefit of the service is received — in substance, where the corporation's senior officers carry out the board's decisions. A director who never enters California can therefore have California-source fees from a California-managed company, and one who attends a meeting there for a company run elsewhere may have none.
• States with no personal income tax. Meetings held in Texas, Florida or Nevada create no state income tax filing.

Board calendars rotate, so the state position can change every year. On the UK side, state income tax falls outside the treaty but can qualify for the UK's unilateral credit relief where it is charged on the same income. On the US federal return it is at best an itemised deduction subject to the state and local tax limitation. A state return that was never filed does not start the state's assessment clock, which is why this layer tends to surface years later.

What happens if US board fees were never reported?

Missed years in this area usually follow one of three patterns: the director did not realise citizenship created a US filing obligation at all; the fee was reported in one country on the assumption that the other had no claim; or the fee was reported in both but with self-employment tax and the credit ordering wrong. Each needs a different remedy.

Correcting the US side

Board fees paid by a US corporation are among the most visible items of income a non-filer can have, because the company has already reported them to the IRS on Form 1099-NEC. The question is not whether the IRS holds the information but when it is matched.

For a dual national who has never filed and also holds unreported UK accounts, pensions or investments, the IRS streamlined filing compliance procedures are the established route. The Streamlined Foreign Offshore Procedures require the most recent three years of returns, six years of FBARs and a certification on Form 14653 that the failure was non-willful, and carry no miscellaneous offshore penalty for those who meet the non-residency test. Our IRS streamlined filing team prepares these submissions in full, and the FBAR penalty calculator indicates the exposure outside the programme.

The streamlined procedures are built around failures involving foreign financial assets. Where the only omission is the US board fee itself — UK accounts were reported, FBARs were filed — the remedy is ordinary amended or delinquent returns, not a streamlined submission. Choosing the wrong route wastes the protection of one and the simplicity of the other.

Whichever route applies, the back years must deal with self-employment tax. Either a certificate of coverage is obtained from HMRC for the relevant periods, or Schedule SE is completed and the tax paid. Adding Schedule C income to three prior years while leaving the self-employment tax question open is an incomplete filing.

Correcting the UK side

From HMRC's perspective, unreported fees from a US company are offshore income. The Worldwide Disclosure Facility is the route for a voluntary disclosure. The number of years HMRC can assess depends on behaviour: four years as the ordinary limit, six where the loss of tax was careless, twelve for offshore matters that were not deliberate, and twenty where it was deliberate. Penalties are materially lower for an unprompted disclosure than for one made after HMRC has opened an enquiry.

Why the two corrections must be sequenced

The credits run in opposite directions for the two slices of the fee, so the corrections are interdependent:

• The US tax on the US-rendered slice must be computed first, because it is the credit on the UK return.
• The UK tax on the whole fee can then be finalised, because the UK tax on the London-rendered slice is the credit on the US return.
• Any state returns sit alongside, feeding a separate UK relief claim.

Run separately by two advisers, this produces figures that never reconcile and a second round of amendments. UK credit relief claims are also subject to their own time limit — broadly four years from the end of the tax year — so older years on the UK side may have to be corrected without the credit the director was once entitled to. That is one of the strongest arguments for acting early.

What records should a UK-resident director keep?

• The appointment letter and director compensation policy, showing cash and equity retainers and any committee fees.
• A dated log of every board and committee meeting, recording physical location and method of attendance, with travel records for US trips.
• Form 1099-NEC (or Form 1042-S, if the wrong onboarding form was used) for each calendar year.
• Equity grant agreements, vesting schedules, delivery statements and copies of any elections filed, with proof of filing dates.
• The HMRC certificate of coverage and the application that supported it.
• A reconciliation of calendar-year dollar totals to UK tax-year sterling totals, with the exchange rates used.
• Any state non-resident returns and evidence of state tax paid.

Our US-UK tax accountants prepare both returns from one set of records so that the US credit, the UK credit and the state filings agree with each other, and our US tax services team handles the federal and state filings alongside the Self Assessment return.

Speak to us in confidence

If you hold a seat on a US board while resident in the UK — or have years of fees, equity awards or state filings that were never fully reported on either side — we will review the position and tell you plainly what needs filing, in what order, and what it is likely to cost. Consultations are confidential and handled by senior cross-border preparers. Contact our cross-border team to arrange a private consultation on your board fee reporting.