Investments for UK-resident US citizens
Aug. 26th, 2018 07:48 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
mtbcA few months ago I mentioned difficulty in long-term capital investment. Regular savings accounts earn hardly anything at current rates but equities are tricky partly because the US and UK have awkward rules about foreign investments and a high fraction of financial instruments look foreign to at least one of them. It is far easier just to hide bullion under one's mattress.
I had previously mentioned that I can think I can buy US-domiciled UK-reporting ETFs, such as from Vanguard, with manageable tax implications; some brokers will even provide me with Form 1099's which makes my reporting far easier. Indeed, I can sell a little even before returning to the US: the UK provides a significant capital gains tax allowance quite separately from the income one. Still, even if reinvested, there are dividends on which I would expect to have to pay the higher UK rate though I expect I could then claim foreign tax credit despite also filing for foreign earned income exclusion for my salary.
I wondered about using a self-select stocks and shares ISA from some UK provider thus allowing me to avoid dividend tax. However, even outside ISAs I am already looking at filing several forms each year. I find it hard to tell if such Vanguard ETFs in an ISA might be deemed a foreign trust by the IRS thus also getting me into Form 3250 territory and I am most inclined to just pay the tax rather than either risk the penalties for messing up those further forms or pay the high fees of anybody I could trust to complete them on my behalf.
Unlike ISAs, SIPPs are safely covered by the tax treaty and better supported by UK-based US-aware brokers but I do not want to tie up so much money for so very long: I wish to buy real estate after I move.
Over the years I have dealt with a few tricky legal issues by myself, sometimes only after extensive study: what I lack in experience I generally make up for in information processing and attention to detail. This instance is thus unusual: the tax treatment of foreign investments so alarms me that I choose to pay tax that probably could have been avoided rather than learn to self-navigate even deeper into the minefield. My time is better spent on other matters.
I had previously mentioned that I can think I can buy US-domiciled UK-reporting ETFs, such as from Vanguard, with manageable tax implications; some brokers will even provide me with Form 1099's which makes my reporting far easier. Indeed, I can sell a little even before returning to the US: the UK provides a significant capital gains tax allowance quite separately from the income one. Still, even if reinvested, there are dividends on which I would expect to have to pay the higher UK rate though I expect I could then claim foreign tax credit despite also filing for foreign earned income exclusion for my salary.
I wondered about using a self-select stocks and shares ISA from some UK provider thus allowing me to avoid dividend tax. However, even outside ISAs I am already looking at filing several forms each year. I find it hard to tell if such Vanguard ETFs in an ISA might be deemed a foreign trust by the IRS thus also getting me into Form 3250 territory and I am most inclined to just pay the tax rather than either risk the penalties for messing up those further forms or pay the high fees of anybody I could trust to complete them on my behalf.
Unlike ISAs, SIPPs are safely covered by the tax treaty and better supported by UK-based US-aware brokers but I do not want to tie up so much money for so very long: I wish to buy real estate after I move.
Over the years I have dealt with a few tricky legal issues by myself, sometimes only after extensive study: what I lack in experience I generally make up for in information processing and attention to detail. This instance is thus unusual: the tax treatment of foreign investments so alarms me that I choose to pay tax that probably could have been avoided rather than learn to self-navigate even deeper into the minefield. My time is better spent on other matters.
