US persons having to close accounts in UK

Aegis

prudryden wrote: »

But is it any different than a UK company saying we will not service your account because you are Indian or Pakistani? This is prohibited under the RRA of 1976.
Surely, financial reasons are not justifiable for discrimination of one's nationality or nation of origin.

And how can a UK company be seen to be treating all customers fairly when some customers can't get served at all? According to the FSA, all customers should be treated equally.

It's the fault of the US tax authorities, not the UK companies. Citizens of the US are liable for taxes on their worldwide income even when they're non resident, and financial companies are under increasing pressure not to offer accounts to US citizens if there's any possibility they might be using them for tax evasion. The US can put quite considerable pressure on these companies to disclose records, and the companies quite often choose to just stop doing business with the US and its citizens instead of giving in to their sometimes quite unreasonable demands.

Not great for the US citizens, but they can get the same treatment if they renounce that citizenship and stop having to be subject to one of the most vengeful tax authorities in the world.

noh

prudryden wrote: »

But is it any different than a UK company saying we will not service your account because you are Indian or Pakistani? This is prohibited under the RRA of 1976.
Surely, financial reasons are not justifiable for discrimination of one's nationality or nation of origin.

And how can a UK company be seen to be treating all customers fairly when some customers can't get served at all? According to the FSA, all customers should be treated equally.

No.
The nationality of the account holders is not the reason for Pershing terminating the accounts.
They are choosing to withdraw from offering accounts to "US persons" because the increasing costs associated with running those accounts makes them unprofitable.
That is not discrimination on grounds of nationality.

tradetime

Yes, this is related to Tax, nothing more. Quite frankly I have no idea why any individual American in his right mind would be using a UK broker anyway, therefore we are probably talking about institutions such as the UK arm of JP Morgan, they will simply move their clients affairs to a US based custodian.

JasX

gozomark wrote: »

Who. or what, are Pershing UK ?

[edit - posted same time]

FYI pershing UK runs Abbey (now santander's) sharedealing accounts, if use this site: https://www.abbeysharedealing.com you get statements and all correspondance with pershing on the letterhead

prudryden

tradetime wrote: »

Yes, this is related to Tax, nothing more. Quite frankly I have no idea why any individual American in his right mind would be using a UK broker anyway, therefore we are probably talking about institutions such as the UK arm of JP Morgan, they will simply move their clients affairs to a US based custodian.

Hi Trade,
That is a good question and one certainly worth responding to. Many Americans who live in the UK were born here (dual nationality) or have lived here most of their lives. Their investments are not in US equities, but in UK products on which they pay British tax, unless, of course, the investments are in an ISA. Their entire estate is in British pounds not USD. Even though they have to file a US tax return, there is usually no tax to pay because of the UK tax credits based on the US/UK tax agreements. Top tax rate in UK =40%. Top tax rate in US = I believe is 28% (could be wrong on that). Cook County can tell us. US brokers find it difficult to hold foreign products and still be able to produce accurate year end tax forms and, therefore, many refuse to hold products evaluated in a foreign currency.

prudryden

noh wrote: »

No.
The nationality of the account holders is not the reason for Pershing terminating the accounts.
They are choosing to withdraw from offering accounts to "US persons" because the increasing costs associated with running those accounts makes them unprofitable.
That is not discrimination on grounds of nationality.

But is cost a justifiable reason to refuse services to an entire class of people, which just happens, in this case, to be US persons? I appreciate your comments. We know that the reason is the extra expense of filling in the cost basis (purchase price) of an equity on a 1099 form. Pershing has the technology to do this as their sister company Pershing US does it every year.

dunstonh

Evidently, other financial institutions are to follow.

So, how will the FSA look at this in line with their Treating Customers Fairly regulations??

How will the UK Gov't look at this in line with the Race Relations Act of 1976 as amended 2003? This act specifically mentions nationality and Nation of Origin as part of the meaning of race.

Our compliance dept have told us to stop giving advice to Americans whether they are resident in the UK or not and also stop giving advice to UK ex pats living in America. It has nothing to do with discrimination and TCF would actually support the firm, not the consumer.

Tax and legal system are the two reasons.

prudryden

Aegis wrote: »

It's the fault of the US tax authorities, not the UK companies. Citizens of the US are liable for taxes on their worldwide income even when they're non resident, and financial companies are under increasing pressure not to offer accounts to US citizens if there's any possibility they might be using them for tax evasion. The US can put quite considerable pressure on these companies to disclose records, and the companies quite often choose to just stop doing business with the US and its citizens instead of giving in to their sometimes quite unreasonable demands.

Not great for the US citizens, but they can get the same treatment if they renounce that citizenship and stop having to be subject to one of the most vengeful tax authorities in the world.

No one has denied that US persons are liable for taxes to the US government. But, in the UK, the tax that you pay is much higher than the US tax so there is no reason not to file a US tax return.
The tax credit wipes out any liability for US tax unless your income is abnormally high. In that case, Alternative Minimum Tax kicks in. It is a very small amount and can generally be paid out of petty cash. As mentioned below, UK top tax = 40%. US, as I understand it, is 28%. Cook County may correct that if wrong.

It is possible to give back your US passport. However, you have to wait 10 years after that before your tax liability finishes, so that is not an option.

The main question is how can a UK or any firm for that matter refuse your account based on your nationality because it costs more (not a lot) than dealing with other nationalities? There may be other justifiable reasons, but is money one of them.

prudryden

dunstonh wrote: »

Our compliance dept have told us to stop giving advice to Americans whether they are resident in the UK or not and also stop giving advice to UK ex pats living in America. It has nothing to do with discrimination and TCF would actually support the firm, not the consumer.

Tax and legal system are the two reasons.

Hi Dun,
Thanks for coming on board. It has been a long time. I can understand about residents in the US, but not Americans living in the UK. Many were born here and have even been in the UK army. They are permanent residents in this country and have never lived in the US. They may have a US passport in addition to their UK passport because one of their parents was a US citizen.
You say your compliance gave tax and legal reasons as an excuse. Can you go into more detail, especially about the legal reasons. PM me if you would prefer. I did speak with the FSA. They are the ones who mentioned to me about potential conflict with TCF but no guarantees at this point.

dunstonh

I can understand about residents in the US, but not Americans living in the UK.

I'm no expert about US taxation (its not my area of knowledge) but I believe that if you are a US ex pat you still have to report your taxation back to the US and could suffer double taxation potentially.

You say your compliance gave tax and legal reasons as an excuse. Can you go into more detail, especially about the legal reasons. PM me if you would prefer. I did speak with the FSA. They are the ones who mentioned to me about potential conflict with TCF but no guarantees at this point.

The risk of legal action being taken by US individuals is considered too high and if the action is heard in a US court rather than a UK court then the awards can be significantly higher and it is considered to be too much of a business risk to deal with them.

I did speak with the FSA. They are the ones who mentioned to me about potential conflict with TCF but no guarantees at this point.

The problem is that the firm could turn TCF in their favour as a reason why they shouldnt do it. i.e. "We do not believe we have the skills and knowledge to offer our services to US ex pats or UK expats living in the UK therefore chose not to transact in that area". The FSA telephone staff (like the frontline FOS staff) are not known for their technical knowledge and do often give positive responses to the person phoning even when it is wrong.

They can also choose not to transact to certain people or groups for commercial reasons as long as discrimination isnt the reason. Choosing not to transact with high risk groups is not discrimination.

I just looked at the compliance manual and it specifically lists "UK Expatriates in Canada or the United States" - No (as in not allowed to advise). for "Canadian or American Nationals resident in the United Kingdom" - "at own risk".

It goes on to say that its for legal reasons but not why. Although as mentioned higher up, I believe its because you can now be sued in a US court rather than UK. Reading on it says that successful claimants could apply for damages to be collected in the UK (subject to UK court agreement).