buying US shares

bobhopeful

I normally hold UK shares or funds.

Are there any additional tax implications or administrative requirements if I purchase a US share traded on NASDAQ in a normal dealing account, not SIPP or ISA?

If the platform gives the choice to buy in USD or GBP, does it makes sense to choose one over the other. My account is funded by GBP, so there will be exchange rates to consider, so does that make it better to select GBP? The choice is offered so there may be advantages to selecting USD?

Lokolo

Yes there are tax implications. You would need to complete form W-8BEN with your broker..

I do not know the additional tax implications outside of an ISA though, so can't help you there.

bowlhead99

Assuming you're UK resident:

Admin wise you would need to complete a W-8BEN form so that your broker as intermediary can ensure you only suffer US withholding tax at 15% under the US-UK tax treaty rather than the 30% which would otherwise apply.

You can offset foreign tax suffered from the UK dividend taxes you'd be paying HMRC on the same dividends, but if you are not paying UK tax on the dividends anyway (eg your dividend income is within your £2k allowance) there is no UK tax bill so no opportunity to offset the US tax suffered. Some Nasdaq stocks like Amazon don't currently pay dividends anyway:)

Most US traded shares are going to be listed in dollars, not GBP if the ones you are looking at are actually listed on the NASDAQ rather than having a secondary or depositary listing on the London stock exchange. Perhaps the ones you are thinking about are the latter.

If your broker offers multi currency accounts you would be able to keep proceeds of USD share sales in USD and avoid going to GBP and back before buying your next USD share with the dollars. But if you are funding the account with GBP, any USD purchase would usually incur an FX conversion fee. If the price is presented to you by your broker in GBP, great, because that will avoid needing to have your broker buy dollars (incurring FX commissions) before executing the trade on your behalf. But that's not common with shares that are listed on the US markets and being traded on those markets.

As an aside, when I buy US listed shares via my AJ Bell account, the buy price is actually shown in GBP for convenience when I request a firm quote for the trade (which is what will appear on my contract note too) but there is still an FX charge because it's still a USD purchase really.

If all the shares you are looking at are being offered in multiple currencies - are you actually looking at individual company shares on the Nasdaq like Amazon or Microsoft, or at US mutual funds which invest in those Nasdaq shares? Investment funds might have different currency classes available, but if you are looking to invest in US-based investment funds (rather than UK/ European funds which choose to invest in the US), that's a whole extra mess of tax which I won't go into as I assume you're not really planning on doing that.

bobhopeful

bowlhead99 wrote: »

Assuming you're UK resident:

Admin wise you would need to complete a W-8BEN form so that your broker as intermediary can ensure you only suffer US withholding tax at 15% under the US-UK tax treaty rather than the 30% which would otherwise apply.

You can offset foreign tax suffered from the UK dividend taxes you'd be paying HMRC on the same dividends, but if you are not paying UK tax on the dividends anyway (eg your dividend income is within your £2k allowance) there is no UK tax bill so no opportunity to offset the US tax suffered. Some Nasdaq stocks like Amazon don't currently pay dividends anyway:)

Most US traded shares are going to be listed in dollars, not GBP if the ones you are looking at are actually listed on the NASDAQ rather than having a secondary or depositary listing on the London stock exchange. Perhaps the ones you are thinking about are the latter.

If your broker offers multi currency accounts you would be able to keep proceeds of USD share sales in USD and avoid going to GBP and back before buying your next USD share with the dollars. But if you are funding the account with GBP, any USD purchase would usually incur an FX conversion fee. If the price is presented to you by your broker in GBP, great, because that will avoid needing to have your broker buy dollars (incurring FX commissions) before executing the trade on your behalf. But that's not common with shares that are listed on the US markets and being traded on those markets.

As an aside, when I buy US listed shares via my AJ Bell account, the buy price is actually shown in GBP for convenience when I request a firm quote for the trade (which is what will appear on my contract note too) but there is still an FX charge because it's still a USD purchase really.

If all the shares you are looking at are being offered in multiple currencies - are you actually looking at individual company shares on the Nasdaq like Amazon or Microsoft, or at US mutual funds which invest in those Nasdaq shares? Investment funds might have different currency classes available, but if you are looking to invest in US-based investment funds (rather than UK/ European funds which choose to invest in the US), that's a whole extra mess of tax which I won't go into as I assume you're not really planning on doing that.

Yes only looking to invest in individual stocks. I have checked again on my platform and in fact the price is quoted in USD but so is the GBP exchange rate, so my GBP will be used. There doesn't appear to be an option to hold USD on the platform. The platform exchange rate is about 0.8% worse than the rate I could get on Transferwise, so quite a bit. If I could hold USD on my dealing account I could exchange GBP to USD on Transferwise then deposit to the platform, but that isn't an option.

I will look on the platform and download form W-8BEN. Will I need to complete the W-8BEN before I buy the US shares, or after?

bowlhead99

bobhopeful wrote: »

I will look on the platform and download form W-8BEN. Will I need to complete the W-8BEN before I buy the US shares, or after?

It's platform dependent. They don't send it to the US IRS, it's just for their internal records so they can properly document your status before acquiring any US securities on your behalf because acting as an intermediary for an undocumented investor is a major compliance headache.

Their clients who are corporates have longer and more complex versions of the forms to fill in. So what typically happens is that you send the form, some specialist department validates it and approves you for trading, and only at that point will they give you the ability to place an order on the US stocks. In recent years both AJ Bell and TD Direct needed me to fill out the paperwork and wait until they enabled my account for US dealing, before I was able to get a live price quote without an error message blocking me from doing it.

There may be some brokers which will let you deal before getting the paperwork in their hand but I suspect they are few and far between - because they would prefer you to not have the ability to get involved in US shares if you don't play ball with the paperwork, rather than act on your behalf and then be still chasing you for it.

[Deleted User]

Hi,


maybe get some info here, other brokers are available.

bobhopeful

[Deleted User] wrote:

Hi,


maybe get some info here, other brokers are available.

I can see on this link https://www.ii.co.uk/ii-accounts/trading-account they say 'Multiple Currencies, manage your money across leading exchanges'. Do they offer mult-currency accounts i.e. you can deposit USD and withdraw as USD? Or do you have to deposit GBP and use their currency exchange rates? If you have to use their exchange rate I cannot see anywhere on the site what their GBP:USD rate would be for comparison. I'm reluctant to open an account just to find out how their exchange rates compare.

londoninvestor

bobhopeful wrote: »

I can see on this link https://www.ii.co.uk/ii-accounts/trading-account they say 'Multiple Currencies, manage your money across leading exchanges'. Do they offer mult-currency accounts i.e. you can deposit USD and withdraw as USD? Or do you have to deposit GBP and use their currency exchange rates? If you have to use their exchange rate I cannot see anywhere on the site what their GBP:USD rate would be for comparison. I'm reluctant to open an account just to find out how their exchange rates compare.

https://www.ii.co.uk/investing-with-ii/international-investing/foreign-exchange

Scroll to the "what does FX cost?" section and you can see the spread vs spot that they charge you.

I'm not sure whether you can transfer USD directly into your ii account - bear in mind that if you can, you should factor in the impact of potential SWIFT intermediary fees, perhaps $20-50 per transfer.