HMRC letter regarding savings account

EdSwippet

colsten wrote: »

... Otherwise, just cough up the tax or cough up the fee to renounce your citizenship. I don't see what the problem is.

It is, as with much in the US, never as simple as 'just paying the tax'.

There are penalties for failing to file reports of the balance you hold in 'foreign' bank accounts. Of course, these aren't 'foreign' to the folk that hold them, they're just a Nationwide current account or a Halifax building society account. But to the US they are foreign, and therefore the US demands a full annual accounting of them.

The penalty for not reporting these 'foreign' accounts to the IRS, if you are a US citizen living in the UK, runs as high as 50% of the highest balance in the accounts for each of six years. Note: the highest balance, rather than some percentage of the tax due. So one can face a huge penalty even where the actual US tax bill is $0.

US citizens living long-term in the UK probably only have UK accounts, so the possible penalty the US could dish out is three times everything you have saved in your lifetime, for not filing US tax returns. Potentially bankrupting, in other words. This is not a 'penalty structure', it is a financial death sentence (*).

Now, so far it hasn't come to this. Well, at least not for most folk. So far. But this is some of what makes people nervous about renouncing their US citizenship. Any outstanding US tax balance cannot simply be 'coughed up' in the way you suggest.

(* These penalties are likely to be unconstitutional under the Excessive Fines Clause of the Eighth Amendment to the U.S. Constitution, but so far this is untested. And nobody wants to be the person who gets to litigate this... )

colsten

EdSwippet, I admit defeat on both, providing the OP with further useful information, and on understanding what you are on about. Why don't you just declare your side in simple words - what is your beef with the US tax law, and how does your beef impact the OP??

EdSwippet

colsten wrote: »

EdSwippet, I admit defeat on both, providing the OP with further useful information, and on understanding what you are on about. Why don't you just declare your side in simple words - what is your beef with the US tax law, and how does your beef impact the OP??

Read this article from today's The Guardian.

CKhalvashi

EdSwippet wrote: »

Other countries also act outside their own national boundaries, but none of them (well, except Eritrea) require payment from their nationals abroad. If your argument is that US actions outside the US benefit everyone, US citizen and non-citizen alike, then surely by that argument all non-US citizens should also be paying US tax?

What benefit do non-US citizens get from the US?

With regard to the first sentence, the US has constantly acted outside of its national boundaries in such a way that if any other country did the same, I could easily see that country being placed with sanctions etc.

Actually, look at the current situation with Ukraine, a soverign state that can (even if the US doesn't think so) make its own decisions.

There is also a class of person who can never renounce US citizenship -- the developmentally disabled. The US will not accept renunciation from anyone it claims does not understand the concept. And parents or guardians may not do it for them.

And how would this be enforced? What tests are put in place to define whether someone is of sound mind or not?

I'm just sceptical as to how this works in reality.

The rationale was to prevent US citizens from dodging a 3% tax during the US civil war. Congress seems not to have noticed that the US civil war is over. And that US tax rates have ballooned from 3% to more than 40%.

When a government (supposedly) has it good anyway, it will use its perceived power to bully others into complying with its laws. If other governments took a step back and realised that the USA isn't better than everyone else (however much they think they are), then their real power would be heavily pushed back into place.

I see the current tax system not changing any time soon.

Talented non-US citizens, likely STEM graduates, thinking about a move to the US for work will notice, and many will decide they should go elsewhere instead.

I really don't blame them.

EdSwippet wrote: »

It is, as with much in the US, never as simple as 'just paying the tax'.

There are penalties for failing to file reports of the balance you hold in 'foreign' bank accounts. Of course, these aren't 'foreign' to the folk that hold them, they're just a Nationwide current account or a Halifax building society account. But to the US they are foreign, and therefore the US demands a full annual accounting of them.

The penalty for not reporting these 'foreign' accounts to the IRS, if you are a US citizen living in the UK, runs as high as 50% of the highest balance in the accounts for each of six years. Note: the highest balance, rather than some percentage of the tax due. So one can face a huge penalty even where the actual US tax bill is $0.

US citizens living long-term in the UK probably only have UK accounts, so the possible penalty the US could dish out is three times everything you have saved in your lifetime, for not filing US tax returns. Potentially bankrupting, in other words. This is not a 'penalty structure', it is a financial death sentence (*).

Now, so far it hasn't come to this. Well, at least not for most folk. So far. But this is some of what makes people nervous about renouncing their US citizenship. Any outstanding US tax balance cannot simply be 'coughed up' in the way you suggest.

(* These penalties are likely to be unconstitutional under the Excessive Fines Clause of the Eighth Amendment to the U.S. Constitution, but so far this is untested. And nobody wants to be the person who gets to litigate this...)

It probably is constitutional, although who is going to litigate this fairly?

How do we know that a US court would deal with this fairly, as somehow I doubt it would be.