Sipp for US Citizen living in UK

joefried

I'd like to open a Sipp (or Stocks and Shares ISA) for my daughter who is a US (and UK) citizen.    Many providers seem to exclude US citizens.  Do you know of any who don't?
Many thanks,
Joe

bostonerimus

Basically no and the tax deferred status of the SIPP with the IRS is uncertain.

joefried

I've just found this company which says they can offer Sipps to US citizens.  https://www.myexpatsipp.com.  Has anybody heard of them?

I recently retired and filed tax returns in the US including my SIPPs and was not taxed on them.

xylophone

https://www.myexpatsipp.com/mesinsights/why-most-uk-pensions-and-sipps-dont-want-us-citizens-or-us-residents
any help?

EdSwippet

joefried said:

I'd like to open a Sipp (or Stocks and Shares ISA) for my daughter who is a US (and UK) citizen.    Many providers seem to exclude US citizens.  Do you know of any who don't?
...

I recently retired and filed tax returns in the US including my SIPPs and was not taxed on them.

According to their terms and conditions, YouInvest will not allow ISAs or trading accounts for US citizens, but don't seem to have a problem providing SIPPs for them. At least, not currently. The choices are definitely thin on the ground though, with many providers simply refusing to do any form of business with US citizens, even those who are dual and who live in the UK. You can thank the US's ridiculous extraterritorial FATCA tax law for this. Feel free to complain to your congressperson about it (but don't expect them to take any notice).

As for SIPPs, some -- but not all -- professionals apparently see these as a bit of a grey area under the US/UK tax treaty, with their 'pension-ness' or not pivoting on some magic proportion of how much of the balance comes from personal contributions and how much from employer contributions. It seems reasonably clear to me though, that the spirit of the treaty intends to cover all pensions. There are cases where it is advantageous not to claim treaty treatment on UK pensions, but these tend to be niche. For example, if you have excess US foreign tax credits and plan to retire in the US. The US tax rules that apply if you don't treat a UK pension as a pension for US tax purposes can quickly become appalling, though. Google the term "PFIC" for more.

Finally, your daughter may need to watch out for US tax traps even if she does use a UK pension. While the pension itself is (probably, perhaps) covered by treaty, she still needs to worry about things like the US's 'highly compensated employee' limits. Also, under the treaty she may be restricted to only contributing as much to a UK pension as she would be allowed to contribute to a US one if a US resident, and US pension contribution annual limits can be lower than UK ones.

SonOf

US citizens still have to file a US tax return.  The US doesnt recognise ISAs as being tax free.

Most platforms/providers will not accept business from US citizens due to FATCA (although many wouldn't prior to that anyway as US citizens can use the US courts to sue British companies and that is too much of a risk for the small volume of individuals they may do business with. So, its cheaper and safer to not offer services.

Malthusian

Is giving up US citizenship an option? Thousands of US expats a year including our own PM are doing it for a reason.

bostonerimus

Malthusian said:

Is giving up US citizenship an option? Thousands of US expats a year including our own PM are doing it for a reason.

The child would have to be over 16 as the US doesn't think anyone younger is mature enough to understand the consequences. I would probably just forget about tax sheltering for the child right now and if you are investing in the UK stick to a saving account or individual shares and just be conscious of the IRS filing thresholds and foreign account reporting rules....it's a real pain.

bostonerimus

SonOf said:

US citizens still have to file a US tax return. 

US citizens need to comply with IRS and Treasury regulations wherever they live, but there are filing thresholds for income and the child might not need to file a US tax return.