My friend and I are co-running a website. He is over 18 and lives in the UK and I'm under 18 and live in the US. He gets all the money from the site into his Paypal, and is going to pay me half.

The amount of money involved is equivalent to the income that would be earned from a part-time or full-time job.

Who would have to pay taxes? What are the relevant forms or regulations in each country? What would be the best way to transfer my half from him to me without him being taxed on it?

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    Can you provide the approximate dollar amount? – Freiheit Aug 22 '18 at 15:35
  • @Freiheit like 10k-99k around that range a year – anon Aug 22 '18 at 15:45
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    I would hope that you have a company set up fir running the website for tax reasons plus liability + a contract that you get the money. This is too much and too complex to rely on words. – mmmmmm Aug 22 '18 at 16:07
  • How are you running this as a partnership or as a plc? – Neuromancer Aug 22 '18 at 17:16
  • @Neuromancer Well, we haven't officially registered a company yet. I just said partnership since it's a 50-50 revshare. We are going to hire some more people to work for us once it gets big enough, so then we would have to officially register. – anon Aug 23 '18 at 1:42

Given how complicated this transaction would be, I would recommend consulting a tax professional.

You would have to receive the money as income from your friend(e.g. servicing a website). Work visas, company structure, and payroll considerations (including underage working) would be a few concerns for treating it as waged income. Regardless, consult a professional.

Receiving the money as income would require you filing a form 1099 or similar (depending on how you are classed as either an employee or an independent contractor). Keep in mind there are labor laws in both the US and the UK.

Dependent on the sum involved ($20 from a friend is a lot different than $2,000 from a friend), I would recommend against trying to treat the money transfer as a gift from him to you fraudulently.

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    Yeah he said something about if I create an invoice for the programming then he can pay that tax-free, and when I'm 18 he will make it a private company so I can get hired on to it – anon Aug 22 '18 at 15:46
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    If you invoice him, you'll have to declare the money as income to the US government. Seriously though, for that sum of money its worth hiring someone who's job it is to determine tax liability. – GOATNine Aug 22 '18 at 15:48
  • Ok, I'll try and look into some professionals. Are there any online, since it would be hard to visit in person. – anon Aug 22 '18 at 15:50
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    @иσαнcяişтiпσ You need to see a professional face to face at least to start with - I would not trust a professional that only deals over the internet - you will need to prove to them you are not money laundering amoungst other things. – mmmmmm Aug 22 '18 at 16:10
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    @иσαнcяişтiпσ Actually both as you have different requirements – mmmmmm Aug 22 '18 at 16:38

If you trust your friend to not try to cheat you, I don't think you necessarily need professional advice on this. It basically breaks down into two parts: how should he pay you, and what do you need to do when you are paid.

For the first part, you should definitely be invoicing him. He can either set up a limited company, or he can declare himself to be a sole trader and pay your invoices as expenses. He won't be taxed on that money in the UK as it won't contribute to his profits.

For the second part, you will be liable for tax in the US on the money you receive as you would for any other income you made. I think this would count as self-employment income in the US as well, but I don't know the US tax system well.

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  • How much money would I have to be making to be taxed on it? – anon Aug 22 '18 at 16:31
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    @иσαнcяişтiпσ I think anything above the standard deduction of $12K, but we really need an answer from someone who knows the US tax system well to address that bit. If you are a dependent on your parents' tax return it may complicate things, or perhaps not as this is earned income. – GS - Apologise to Monica Aug 22 '18 at 16:34
  • I just looked it up and I think it's 10.4k – anon Aug 22 '18 at 16:35
  • However if paid as an invoice in UK isn't that subject to VAT - basically you pay VAT or NI on payments. – mmmmmm Aug 22 '18 at 16:41
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    I think downvoters might reasonably thing I've oversimplified this (e.g. there's the VAT issue). I stand by the core point though that it's really two independent problems: how to split up the income on the UK side and how to deal with the income in the US. Also I think that finding a suitably expert professional can itself be challenging, so it's best to get as far as you can without one first. – GS - Apologise to Monica Aug 23 '18 at 5:52

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