Buying American Shares like its own citizens

PingPongSet

I want to find out if it is possible for UK citizens living in the UK to buy American shares like its own citizens without extra shortcomings.
Currently, there are some limitations if buying American shares via HL.

Thrugelmir

What  shortcomings are you referring to? 

bowlhead99

PingPongSet said:

I want to find out if it is possible for UK citizens living in the UK to buy American shares like its own citizens without extra shortcomings.
Currently, there are some limitations if buying American shares via HL.

As a non US person (citizen or resident), it's hard to get access to IPOs. However for shares trading on the main market (i.e. already listed on Nasdaq, NYSE) it's generally fine. You may find it more difficult to trade OTCBB / pink sheets, but unless you're planning to star in Wolf of Wall Street, no big problem in that.

Some UK brokers are not open for trading through the whole US trading day up to 9pm UK time, and HL is not known for being the most competitive, as they have a million customers and most don't want or need to buy US equities directly. Some other UK brokers don't offer the US markets at all. And some US traded financial instruments aren't available to be held in an ISA (HMRC rule, not the fault of the broker) or pension (individual pension provider's rule) so you might have to use a general 'not in a tax wrapper' investment account.

Most US brokerages don't offer accounts to non residents/non citizens. Still, if you explain what particular shortcomings or restrictions you're talking about, perhaps someone could offer a solution to get around them.

PingPongSet

Thrugelmir said:

What  shortcomings are you referring to? 

Please find attached a document on my opening post.

PingPongSet

Still, if you explain what particular shortcomings or restrictions you're talking about, perhaps someone could offer a solution to get around them.

Please find attached a document on my opening post.

bowlhead99

PingPongSet said:

Still, if you explain what particular shortcomings or restrictions you're talking about, perhaps someone could offer a solution to get around them.

Please find attached a document on my opening post.

Well, issues such as: "There may be limitations to your participation in a Corporate Action where restrictions are placed by the issuer on the type of investor, or country of residence, of shareholders" are not going to be solved unless you change your investor type, residence or citizenship.

Whereas issues such as: amounts of  income or capital proceeds being sent to you in dollars even though you might prefer sterling, would not be solved by changing your residence or citizenship because the US companies are not going to start paying people in something other than dollars or changing their listing currency. However, you could partially overcome the issue of repeat conversion fees by using (e.g.) a trading account from Interactive Investor who allow you to hold cash in multiple currencies so you don't need to keep going back and forth to sterling (unless in an ISA account where an HMRC rule requires it), or eToro.com or IG.com who can run the accounts in dollars after a conversion of your deposit, so it's a one time conversion and perhaps an FX rate implication if you were buying UK stocks.

Do you really want to receive US shareholder meetings and cast your vote or election on corporate actions? Is that your main concern? Will not be possible for a number of US shares if you are buying them via CDI as HL does.

If you want to avoid your interests in the US company being purchased and settling through the UK CREST system as CDIs (for better cost cost and convenience from the platform's perspective) then you could consider using a primarily non-UK broker like Interactive Brokers, Saxobank or Degiro. Note that many of the cheapest brokers will hold your shares as nominee (and even lend them out to other counterparties); I have recently used Freetrade for a few speculative purchases, but they have recently started offering fractional US shares through their US partner and that definitely wouldn't give you full voting rights and corporate actions if that's what you're looking for. 

I have various non-UK holdings on AJ Bell's Youinvest platform and I don't think they use CREST for all international stocks, even though your HL platform says it does.   IG.com would probably be cheaper for US sharetrading, though I only use them for spreadbets as most of my investing is through AJ Bell who offer a decent range of  open-ended funds in addition to UK and international shares.

EdSwippet

I imagine the largest irritant is that UK investors have to pay a non-recoverable 15% in US withholding tax on dividends from US stocks(*), whereas US citizens get the entire dividend with no US tax withheld.

Of course, these US citizens then have to square up with the US IRS, and perhaps also their state and municipality, so they may end up with an overall tax bill that is lower or higher than the 15% that UK investors have to pay the US. And the UK investor can credit this 15% against UK tax, but only to the extent that there is UK tax on it (so not in an ISA, and fully only in UK higher rate tax). The result of all this is that a US citizen might be able to benefit from dividends on US stocks entirely tax free or at a rate below 15%, whereas UK investors generally face a minimum 15% tax(*). Using a US broker, if one will take you, is not a way round the issue.


(*) Except in a SIPP or other pension, but only if the provider handles this. It's not personally recoverable by the investor.

thenewcomer

EdSwippet said:

I imagine the largest irritant is that UK investors have to pay a non-recoverable 15% in US withholding tax on dividends from US stocks(*), whereas US citizens get the entire dividend with no US tax withheld.

Of course, these US citizens then have to square up with the US IRS, and perhaps also their state and municipality, so they may end up with an overall tax bill that is lower or higher than the 15% that UK investors have to pay the US. And the UK investor can credit this 15% against UK tax, but only to the extent that there is UK tax on it (so not in an ISA, and fully only in UK higher rate tax). The result of all this is that a US citizen might be able to benefit from dividends on US stocks entirely tax free or at a rate below 15%, whereas UK investors generally face a minimum 15% tax(*). Using a US broker, if one will take you, is not a way round the issue.


(*) Except in a SIPP or other pension, but only if the provider handles this. It's not personally recoverable by the investor.

non-US residents have to pay 15% tax on dividends? 
Am i correct that the dividends shown on our accounts are already taxed?

hoofy

bowlhead99 said:

PingPongSet said:

I want to find out if it is possible for UK citizens living in the UK to buy American shares like its own citizens without extra shortcomings.
Currently, there are some limitations if buying American shares via HL.

 Some other UK brokers don't offer the US markets at all. And some US traded financial instruments aren't available to be held in an ISA (HMRC rule, not the fault of the broker) or pension (individual pension provider's rule) so you might have to use a general 'not in a tax wrapper' investment account.

I just bought American shares in my Iweb Isa, have I done something I shouldn't have? Or would I not have been able to make the purchase if it wasn't above board?

Steve182

thenewcomer said:

EdSwippet said:

I imagine the largest irritant is that UK investors have to pay a non-recoverable 15% in US withholding tax on dividends from US stocks(*), whereas US citizens get the entire dividend with no US tax withheld.

Of course, these US citizens then have to square up with the US IRS, and perhaps also their state and municipality, so they may end up with an overall tax bill that is lower or higher than the 15% that UK investors have to pay the US. And the UK investor can credit this 15% against UK tax, but only to the extent that there is UK tax on it (so not in an ISA, and fully only in UK higher rate tax). The result of all this is that a US citizen might be able to benefit from dividends on US stocks entirely tax free or at a rate below 15%, whereas UK investors generally face a minimum 15% tax(*). Using a US broker, if one will take you, is not a way round the issue.


(*) Except in a SIPP or other pension, but only if the provider handles this. It's not personally recoverable by the investor.

non-US residents have to pay 15% tax on dividends? 
Am i correct that the dividends shown on our accounts are already taxed?

As a UK citizen 15% withholding tax will be taken before you receive the dividend so you will see the net amount after deduction in your account. Dividends are also taxed at 15% if the US company's shares are listed on LSE as I found out last year.

As Edswippet said, US dividends paid within pensions are not taxed, hence I now keep any dividend paying US shares in my SIPP rather than my ISA or dealing account.

Steve182

hoofy said:

bowlhead99 said:

PingPongSet said:

I want to find out if it is possible for UK citizens living in the UK to buy American shares like its own citizens without extra shortcomings.
Currently, there are some limitations if buying American shares via HL.

 Some other UK brokers don't offer the US markets at all. And some US traded financial instruments aren't available to be held in an ISA (HMRC rule, not the fault of the broker) or pension (individual pension provider's rule) so you might have to use a general 'not in a tax wrapper' investment account.

I just bought American shares in my Iweb Isa, have I done something I shouldn't have? Or would I not have been able to make the purchase if it wasn't above board?

You've done nothing wrong, you can hold US shares in your ISA if your provider facilitates that. However if they are dividend paying shares you will receive only 85% of the dividend after deduction of withholding tax.

I assume they made you complete a W-8BEN form before they allowed you to buy them?