UK Tax resident; UK/US citizen

EdSwippet

bowlhead99 wrote: »

Still, in your case it sounds reasonably clear that you're UK resident and very unlikely to be US resident having not lived there for a decade. So like I said, "yes I am only resident in UK and not anywhere else " sounds right, along with "yes I'm a us citizen".

Except that the US has the concept of a 'resident for tax purposes', which is apparently the exact phrase used in the question. US citizens are US 'residents for tax purposes' no matter where on the planet (or even off it) they reside.

bowlhead99 wrote: »

You just wanted to chip into the thread to have a bit of a moan.

Perhaps. But if you stop to think about it for a moment you'll realise that the US here is forcing other countries' banks and financial institutions to spend billions of pounds to collect information for use by the IRS. The collective cost of FATCA globally is estimated at $8bn annually. The US estimates it will raise $0.8bn per year.

Any tax estimated to cost ten times more to collect than it raises deserves to be questioned. In this case, of course, the US doesn't care about the costs because it won't be paying them. It will, naturally, be receiving the revenue though.

FATCA drains the coffers of other countries and diverts proceeds to the US, but not even efficiently. It would have been vastly cheaper for the non-US countries to have simply paid the US $0.8bn per year in exchange for scrapping FATCA. Why they did not do that is a mystery.

bigadaj

.....or if you are an institution that is happy to not have any dealings with the us or its citizens you ensure that you don't transact with them.

This isn't of course possible for the largest institutions but then they have the largest coffers and reasons for complying with the us government requirements.

So the people that also suffer are us citizens abroad as institutions don't want the hassle of dealing with them which limits their choice and options.

bowlhead99

EdSwippet wrote: »

Except that the US has the concept of a 'resident for tax purposes', which is apparently the exact phrase used in the question. US citizens are US 'residents for tax purposes' no matter where on the planet (or even off it) they reside.

You're correct that the concept of 'resident for tax purposes' applies to some people wherever they happen to be, such as 'lawful permanent residents' i.e. green card holders.

However, citizens do not need to be classified as 'resident for tax purposes' to make them file an annual tax return, because as a citizen they already have to file a tax return.

In other words, citizens and residents file tax returns. That doesn't mean citizens are 'residents' or 'deemed residents' or 'residents for tax purposes'. Their obligation to be a taxpayer comes from them being a citizen rather than from being a resident, which is why there is a specific question in banks' customer onboarding documentation to ask you if you are a citizen.

Of course, as I mentioned in post 3, the bank may want to apply a slightly different interpretation of what they mean by resident, for administrative convenience, and I have seen some financial institutions' forms have small print to the effect of, "if you are a US citizen please also put United States and your US tax ID in this list of your tax residences at question 1". However, as I mentioned, there would need to be some guidance, help text or accompanying small print to that effect if that's what they wanted you to do.

Because as a citizen who was not resident, you would still be a taxpayer who needs to be reported under FATCA as a Specified US Person, but you wouldn't actually be a resident, which is why I said OP had not done anything obviously wrong in filling out the form as they did, in absence of small print or direct guidance.

Perhaps. But if you stop to think about it for a moment you'll realise that the US here is forcing other countries' banks and financial institutions to spend billions of pounds to collect information for use by the IRS.

Yes they are, and it's inefficient and a huge regulatory burden. I know because working in the sector I know what I would charge you per hour if you wanted me to advise on your FATCA compliance for your bank or investment fund and it would be rather more than minimum wage, not to mention huge systems and staff resource and training costs.

My comment that the person above was just having a moan was not directed at you, but at someone having what appeared to be a rather more superficial understanding of the issues

It would have been vastly cheaper for the non-US countries to have simply paid the US $0.8bn per year in exchange for scrapping FATCA. Why they did not do that is a mystery.

Well, they all signed agreements to water down the full scope of FATCA and turn it into what is now largely a reporting rather than withholding regime, in exchange for their cooperation - the UK was one of the first to hammer out the terms of the agreement which the others ended up broadly following.

However, at the same time they do rather like the idea of getting information about their taxpayers' assets and incomes from overseas locations so the systems that were built to handle FATCA accountholder review and reporting will now be evolved into the next generation of international automatic exchange of information which has about 100 countries signed up and helps reduce casual tax evasion.

As the $8bn (or whatever it ends up at now FATCA has evolved into a global 'common reporting standard') will largely be borne by the private sector rather than public sector, governments don't mind it so much, especially as it can be couched as cracking down on tax evasion. After all, $8bn paid to software suppliers and consultants and employees is all commercial activity which helps the world go round, even though it isn't productive industry.

EdSwippet

bowlhead99 wrote: »

However, at the same time they do rather like the idea of getting information about their taxpayers' assets and incomes from overseas locations so the systems that were built to handle FATCA accountholder review and reporting will now be evolved into the next generation of international automatic exchange of information which has about 100 countries signed up and helps reduce casual tax evasion.

Presumably you refer here to CRS. Well, yes, but.

The US notably has not signed up to CRS. So we have FATCA as a unilateral move on the part of the US, designed to allow it to extract wealth from other countries via asymmetric information flows -- much goes in to the US, little if anything comes out of it back to other governments. In tandem the absence of the US from CRS will help to turn the US into the world's last viable tax haven. It's all highly hypocritical.

Also worth noting that while CRS is 'modeled' on FATCA, it specifically does not include citizenship as a criteria for tax jurisdiction.

bowlhead99

Pretty much, but there is a bit more to it.

Yes I refer to CRS, and its predecessor that the UK has in place as a "UK FATCA" equivalent for Crown Dependencies like channel islands /Isle of Man and overseas territories like Cayman/BVI/ Bermuda. The UK is already getting info about 2014 and 2015 bank balances and interest of its residents from Bermuda and Cayman etc this year, and will send info on foreign residents back to Jersey and Guernsey and Gibraltar etc in return.

Next year HMRC's reach will expand to cover the whole of Europe and places as far off or obscure as Argentina or Greenland when it gets replaced with CRS; every bank and broker and investment fund in those territories is preparing for information exchange to one extent or another and there are lots more countries signed up for the year after that too.

As you say, IRS is not playing in the CRS pool because it already moved first and set up the FATCA agreements to get the data for itself. But those FATCA agreements it signed with other countries are partially reciprocal, in other words under the agreements my US bank will report me as a UK taxpayer (if my account is big enough) when the IRS exchanges the information both ways with HMRC, and if the US doesn't keep to its end of the bargain we don't need to stick to ours.

Of course, the US has huge financial clout and its banks don't like being regulated, so might not bother keeping up its obligations on data exchange even while we keep up ours. But the agreements are signed for it not to be just one way traffic.

You are right that CRS doesn't look at citizenship. Because non US countries don't care what income their citizens are making, only what their residents are making. So that's an irrelevance for our own non-US data exchange programs, but we don't mind collecting the info for the Americans while we're doing a recordkeeping and reporting job anyway.

EdSwippet

bowlhead99 wrote: »

But the agreements are signed for it not to be just one way traffic.

In the actual agreement, the UK is bound to provide data to the US, whereas the US only binds itself to the far weaker requirement of "pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange."

What we got in exchange for our huge administrative costs, then, is a 'commitment' from the US to maybe, perhaps, try and obtain some data for the UK. So I'm afraid we do have to stick to our end of this, even though the US may not stick to its end. And all that is aside from the obvious asymmetry of the situation -- not only does the UK have to expend a lot more resource than the US in searching for nebulous US 'indicia', but as a country with residence-based taxation the UK has no interest in UK citizens who now live permanently in the US.

Also worth noting that the FATCA agreements are not actually sanctioned by congress, and so are not, you know, actual tax treaties. This despite being sold as such by the US (and swallowed as such by gullible partner countries).

Courtney1

Hi, a quick update - I spoke to a representative at the bank who spoke to her manager and the bottom line answer is they don't accept applications from US citizens. I am, basically, screwed for getting any decent interest unless I lose my US citizenship.

I am going to look into the Savings with International Banks, and possible offshore accounts - who knows ...

jimjames

bigadaj wrote: »

So the people that also suffer are us citizens abroad as institutions don't want the hassle of dealing with them which limits their choice and options.

People like Boris Johnson who have never lived in the US but just happen to have been born there by accident and now have to submit US tax returns. I also know an American with dual nationality who hasn't lived there for 25 years that has to report as well.

It does seem a very unfair system when it affects people who have no US residency.

Courtney1 wrote: »

I am going to look into the Savings with International Banks, and possible offshore accounts - who knows ...

I hear there are some good deals going in Panama

bigadaj

jimjames wrote: »

People like Boris Johnson who have never lived in the US but just happen to have been born there by accident and now have to submit US tax returns. I also know an American with dual nationality who hasn't lived there for 25 years that has to report as well.

It does seem a very unfair system when it affects people who have no US residency.

I hear there are some good deals going in Panama

People can presumably give up their us citizenship if they have dual nationality though.

Boris has enough millions to pay his accountants to sort this out anyway, and it's another element in his master plan to match winston Churchill in every aspect. Though I expect that he wouldn't want to renounce us citizenship as this is the one aspect I think he might want to exceed Churchill by becoming us president after being the uk prime minister of course.

jimjames

bigadaj wrote: »

People can presumably give up their us citizenship if they have dual nationality though.

Interesting that they also massively increased the fees to renounce your US citizenship at the same time, now several thousand dollars I believe.