You've Landed a US Client. Now What?
You run a 12-person digital agency in Shoreditch. You've just won a £63,400 project from a New York-based SaaS company. It's your first US client. You're excited. Then you start thinking about the tax implications.
Do you need to register for US sales tax? What about VAT? Will the IRS come after you? Can you just invoice them like a UK client and hope for the best?
This is the exact scenario we walk agency founders through regularly at Agency Founder Finance. As ICAEW qualified accountants, we see the same questions come up every time a UK agency lands their first American project. The good news: a single US project rarely triggers US tax registration. But the VAT treatment is different, and you need to get it right from day one.
Does a One-Off US Project Create a US Tax Obligation?
Short answer: almost certainly not. But there are conditions.
The US taxes businesses based on two things: where they are physically present (called "nexus" in US tax speak) and where their income is sourced. A single project delivered remotely from your UK office typically does not create a physical presence. You are not setting up an office, hiring staff, or signing a lease in the US. You are just sending work product across an ocean.
However, there is a risk area: permanent establishment. The US-UK Double Taxation Treaty says your UK agency will not have a US permanent establishment unless you have a fixed place of business there or a dependent agent operating on your behalf. A one-off project does not create a fixed place. But if that project requires you to send a team member to New York for two weeks to present work, you start getting closer to the line.
For a purely remote project with no US-based staff, no US office, and no US bank account, you are safe. Invoice from your UK company, pay UK tax on the profit, and move on.
The VAT Treatment: This Is Where It Gets Specific
Here is the part most agency founders get wrong. They assume because the client is in the US, they do not charge VAT. That is half right. But the half they miss can cost them.
For UK VAT purposes, services to a US business client are generally outside the scope of UK VAT. You do not add 20% to your invoice. The place of supply for B2B services is where your customer belongs, not where you are. Since your customer is in the US, the supply is outside the UK. No UK VAT to charge.
But here is the trap: you must be able to prove the customer is a business. If you invoice a US individual (not a business), the place of supply shifts back to the UK, and you should charge UK VAT. For agency work, this is rare. Your US client is almost certainly a business. But get their VAT or EIN number on your records anyway.
On your VAT return, you record this sale in box 6 (total value of supplies) and box 7 (total value of supplies to non-UK customers). You do not put anything in boxes 1 through 5. Your VAT return stays clean.
If you are not VAT registered in the UK yet because your turnover is under £90,000, this US project might push you over the threshold. A £63,400 project added to £40,000 of UK income takes you past £90,000. You must register for UK VAT. That changes everything. Plan for it.
What About US Sales Tax?
US sales tax is different from UK VAT. There is no federal sales tax in the US. Each state sets its own rules. Some states have sales tax. Some do not. Some require you to register if you have a physical presence. Some have economic nexus thresholds based on sales volume or transaction count.
For a single project worth £63,400, you are unlikely to trigger economic nexus in any state. Most states set the threshold at $100,000 or 200 transactions per year. One project does not hit that.
But if your US client is in a state like California or Texas where sales tax applies to services, and you send someone there to deliver the work, you might create physical nexus. That is a different conversation.
For the standard remote agency project: no US sales tax registration needed. Invoice without sales tax. Your client will handle their own use tax obligations if required.
The Practical Steps for Invoicing Your US Client
Your invoice to the US client should look different from your UK invoices. Here is what to include:
- Your UK company name and address
- Your UK VAT registration number (if registered)
- Your client's company name and US address
- Your client's EIN or VAT number (if they have one)
- A clear description of the services
- The amount in GBP or USD (agree this upfront)
- A note: "VAT: Outside the scope of UK VAT. Reverse charge applies."
If you invoice in USD, record the GBP equivalent on your VAT return using the HMRC spot rate for the date of invoice. Do not guess the exchange rate. Use the official rate from HMRC's website.
Set your payment terms clearly. US clients often expect Net 30 or Net 60. UK agencies typically use 14 or 30 days. Agree this in your contract, not after the invoice lands.
Permanent Establishment Risk: The Real Concern
The biggest risk from a single US project is not tax registration. It is accidentally creating a permanent establishment (PE) in the US.
If you have a PE, the IRS can tax the profits attributable to that PE. And the paperwork to unwind a PE is brutal.
What creates a PE for a UK agency?
- Having a US office or co-working space where you regularly work
- Having a US bank account in the agency's name
- Sending staff to the US for more than 30 days in a 12-month period
- Having a US-based contractor who effectively operates as your agent
- Signing a lease for US premises, even short-term
For a one-off project, avoid all of these. Do the work from your UK office. Do not open a US bank account just for this one client. Do not hire a US freelancer to manage the relationship. Keep everything in the UK.
If your project genuinely requires you to be in the US for a week of client meetings, that is usually fine. HMRC and the IRS both recognise short business trips. But if those trips become regular, or if you start working from a WeWork in Manhattan for two months, you have a problem.
What If the US Client Asks You to Register for US Tax?
Some US clients, particularly large corporates, have procurement policies that require all vendors to have a US tax ID or be registered for sales tax in their state. This is their internal policy, not a legal requirement for you.
You have three options:
- Push back. Explain you are a UK company with no US presence and that no US tax registration is required under the US-UK treaty. Provide a W-8BEN-E form (the IRS form that certifies your foreign status). This usually satisfies their procurement team.
- Register for an EIN. You can get a US Employer Identification Number from the IRS without creating a PE. It is a free online application. Some agencies do this to make their US clients comfortable. It does not, by itself, create US tax liability. But it can trigger questions from your UK accountant about whether you have US filing obligations.
- Walk away. If the client insists on something that creates real US tax exposure for a project that is not worth the headache, say no. There will be other clients.
We generally recommend option one for a single project. Fill out the W-8BEN-E, send it to the client, and move on. If the project is large enough to justify the administrative cost, option two is fine. Just tell your accountant you did it.
Currency and Cash Flow: The Hidden Trap
US clients often pay in USD. Your bank converts it to GBP. The exchange rate moves between invoice date and payment date. That creates a currency gain or loss.
If the dollar strengthens against the pound between invoice and payment, you make a small FX gain. That is taxable as income. If the dollar weakens, you take a loss. That is deductible.
Track these separately. Do not just book the GBP amount you receive and forget the exchange movement. Your accountant needs to see the original GBP value at invoice date and the actual GBP received. The difference goes through your P&L as a foreign exchange gain or loss.
For a £63,400 project, a 5% swing in exchange rates means over £3,000 of FX gain or loss. That is not trivial. Use a multi-currency account like Wise, Revolut, or a Barclays foreign currency account to hold USD until you want to convert. That gives you control over the timing of the conversion.
Should You Use an Umbrella Company or US Entity?
Some agency founders ask whether they should set up a US LLC or use an umbrella company for a single US project. The answer is almost always no.
Setting up a US LLC costs money, requires annual filings, and creates US tax filing obligations even if the LLC has no activity. A single project does not justify that cost. And an umbrella company takes a cut of your revenue while adding complexity to your UK tax position.
Invoice directly from your UK company. Use the W-8BEN-E form. Keep the structure simple. You can always set up a US entity later if US work becomes a regular part of your business.
When Does a Single Project Become a US Tax Problem?
You cross the line from "one-off project" to "US tax problem" when any of these happen:
- You start regularly working from the US for more than 30 days per year
- You hire US-based staff or contractors
- You open a US office or co-working space
- You exceed state-level economic nexus thresholds (usually $100k or 200 transactions)
- You sign a lease or purchase property in the US
If your US work grows, you need a proper international structure. That might mean a US subsidiary, a US payroll, and separate US tax filings. But for one project, none of that applies.
What to Tell Your UK Accountant
Before you invoice that US client, send your accountant a short email with these details:
- Client name and US address
- Project value and currency
- Whether any staff will travel to the US
- Whether the client has asked for any US tax forms
- Your contract terms (especially payment terms and currency)
Your accountant needs this to confirm your VAT treatment is correct and to check you are not creating a PE risk. If you are working with Agency Founder Finance, we will walk you through the W-8BEN-E form and the VAT return treatment. If you are with another firm, make sure they have experience with US-UK cross-border work. Not all UK accountants do.
For more on how we support digital agencies with international projects, see our services page. We handle the cross-border tax questions so you can focus on the work.
The Bottom Line on Your First US Project
A single US client project does not require US tax registration. It does not create a permanent establishment if you do the work from the UK. It does not trigger US sales tax obligations.
What it does require is correct VAT treatment on your UK return, a W-8BEN-E form for the client's records, and careful tracking of currency movements. Get those three things right and you are in good shape.
If your US client asks for something that feels like it creates US tax exposure, push back or walk away. One project is not worth the administrative headache of US tax registration.
And if you are not yet VAT registered in the UK, check whether this project pushes your turnover over the £90,000 threshold. If it does, register before you invoice. HMRC does not accept ignorance of the threshold as an excuse.
For agencies considering more regular US work, read our international agencies guide for the full picture on structuring cross-border operations. And if you have a specific project in mind, contact us to talk through your numbers.