US/UK dual nationality - can I invest?

1wayoranother

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Brie

Maybe relinquishing your US citizenship would make things easier?

Most financial advisers that I've talked to seem unable to deal with anything outside of the UK including foreign tax arrangements.  You (& I) might have more luck talking to a bank/adviser on the Channel Islands where they are more used to dealing with international clients.  

1wayoranother

Brie said:

Maybe relinquishing your US citizenship would make things easier?

Most financial advisers that I've talked to seem unable to deal with anything outside of the UK including foreign tax arrangements.  You (& I) might have more luck talking to a bank/adviser on the Channel Islands where they are more used to dealing with international clients.  

Yes it seems like that - I've been wondering about renouncing the citizenship, it was always presented to me as something that could be really useful but it is causing me significant headaches in this respect. 

DullGreyGuy

1wayoranother said:

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Which product are you trying to open?

It makes no sense that you are talking about W8-BEN to me. 

If you open a S&S ISA then it won't be taxed in the UK but as a US citizen you are having to do US tax returns and so the ISA must be declared on your  Form 8621 and you will be taxed (there are different forms for a cash ISA) and you will be taxed on it

wmb194

DullGreyGuy said:

1wayoranother said:

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Which product are you trying to open?

It makes no sense that you are talking about W8-BEN to me. 

If you open a S&S ISA then it won't be taxed in the UK but as a US citizen you are having to do US tax returns and so the ISA must be declared on your  Form 8621 and you will be taxed (there are different forms for a cash ISA) and you will be taxed on it

Isas still have US dividend withholding tax applied so it makes sense that you'd be asked to complete a W8-BEN in order to get the 15% treaty rate (otherwise 30%). 

wmb194

1wayoranother said:

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Many British financial institutions don't want the headache of dealing with the FACTA reporting requirements and potential liabilities of dealing with US citizens*. My suggestion would be to look for a US broker that offers accounts here and one I can think of is Interactive Brokers.

https://www.interactivebrokers.co.uk/en/home.php

*Some years ago Standard Chartered Bank was badly burned by this.

Voyager2002

Your US citizenship means that you are required to submit US tax returns each year (a significant nuisance) and depending on your earnings might sometimes need to pay US tax. That in itself could be a good reason to relinquish it.

Bostonerimus1

wmb194 said:

DullGreyGuy said:

1wayoranother said:

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Which product are you trying to open?

It makes no sense that you are talking about W8-BEN to me. 

If you open a S&S ISA then it won't be taxed in the UK but as a US citizen you are having to do US tax returns and so the ISA must be declared on your  Form 8621 and you will be taxed (there are different forms for a cash ISA) and you will be taxed on it

Isas still have US dividend withholding tax applied so it makes sense that you'd be asked to complete a W8-BEN in order to get the 15% treaty rate (otherwise 30%). 

W8-BENs are not completed by US citizens, so the OP should NOT be filing that form.

If the OP can find a brokerage that is ok working with a US citizen then they can invest in anything they want in the UK. However, that will not necessarily be a wise move when it comes to US taxation. I assume the OP is filing US taxes and claiming things like foreign earned income exclusion etc. given their US citizenship. There is no "tax problem" investing in individual company shares, bonds and UK saving accounts. The problems arise if you want to invest in UK funds. These are "Passive Foreign Investment Companies" and are taxed under some complex IRS rules, but basically you will probably have to "mark-to-market" each year. You can get around that problem if you invest in a UK pension as the pension wrapper is recognized in the US/UK tax treaty and insulates your funds from US taxation until you make withdrawals when they are taxed as income. ISAs are not recognized by the IRS so you will pay tax on any gains and again fall foul of PFIC rules if you buy UK funds. There might be some good news on the horizon as Schwab is in talks with HMRC to sell US ETFs in the UK so they would be a fund option that would be ok with both the US and UK tax authorities.

For now if you are a US citizen in the UK and don't have access to a US based brokerage I would concentrate on using your UK pension/SIPP to invest and also UK bank saving accounts that pay interest. Whether there is any benefit to an ISA depends on how much tax you pay in the US and the UK and a GIA might be just as good, but stick to individual company shares in those to avoid US PFIC taxation.

As a US/UK dual citizen myself I would recommend that the OP renounces US citizenship as it will continue to complicate their financial life in the UK. It's nice to have a second passport, but if the OP does not have plans to move to the US and has basically no family or emotional connection the the US then it is more trouble than it's worth. You'll have to pay a few hundred dollars and be in tax compliance for at least 5 years.

wmb194

Bostonerimus1 said:

wmb194 said:

DullGreyGuy said:

1wayoranother said:

I am a US/UK dual national, I was born in the USA to english parents and moved to the UK when I was nine. I've only lived in the UK since, I used to hold a US passport but it has expired. I believe I cannot invest in the UK because it says I cannot use the W8-BEN due to dual nationality which is preventing me signing up on the stocks isa I was looking at. 
I'm struggling to find clear info about this, am I classed as an expat even though I only lived in the US as a child and have been British since birth? 
Any help or pointers would be gratefully received. 

Which product are you trying to open?

It makes no sense that you are talking about W8-BEN to me. 

If you open a S&S ISA then it won't be taxed in the UK but as a US citizen you are having to do US tax returns and so the ISA must be declared on your  Form 8621 and you will be taxed (there are different forms for a cash ISA) and you will be taxed on it

Isas still have US dividend withholding tax applied so it makes sense that you'd be asked to complete a W8-BEN in order to get the 15% treaty rate (otherwise 30%). 

W8-BENs are not completed by US citizens, so the OP should NOT be filing that form.

I'm not saying they should. I'm saying these days it's standard practice for UK brokers to ask for it to be completed before they will open an account and if you don't or cannot, they won't.

EdSwippet

Bostonerimus1 said:

As a US/UK dual citizen myself I would recommend that the OP renounces US citizenship as it will continue to complicate their financial life in the UK. It's nice to have a second passport, but if the OP does not have plans to move to the US and has basically no family or emotional connection the the US then it is more trouble than it's worth. You'll have to pay a few hundred dollars and be in tax compliance for at least 5 years.

Make that a few thousand dollars, rather than a few hundred.

The current purely administrative price for the privilege of dropping US citizenship is a whopping $2,350, up from $450 in 2014 (and in some cases, $0 before 2010). The US recently sort-of blinked in the face of a class action lawsuit, finally agreeing to drop the fee back to $450 around a year ago, but so far has dragged its heels as a substitute for actually taking action.

On top of this $2,350 sit possible tax preparation fees. However, worth noting that tax compliance is not a strict prerequisite to renunciation. Aside from a vague warning at the interview, about how renouncing won't extinguish past US tax liabilities, there's no real interaction between the IRS and USCIS. It's obviously a good idea to effect a clean tax exit from the US where possible, particularly if it's all just paperwork with ultimately no US tax payable, but not strictly required by the renunciation process itself. A DIY final US tax return is time-consuming, but should not prove impossible for someone with straightforward finances and an organised approach.

For the OP, if for some reason renouncing is too bitter a pill to swallow, this article may offer some useful pointers:

Investing from the UK for US citizens and US permanent residents - Bogleheads

For someone with plans to move to the US in future, US citizenship is viewable as 'call option', albeit potentially an expensive one. For someone with no such plans, it can be nothing more than an unwanted and headachy US tax ball-and-chain.

Bostonerimus1

EdSwippet said:

Bostonerimus1 said:

As a US/UK dual citizen myself I would recommend that the OP renounces US citizenship as it will continue to complicate their financial life in the UK. It's nice to have a second passport, but if the OP does not have plans to move to the US and has basically no family or emotional connection the the US then it is more trouble than it's worth. You'll have to pay a few hundred dollars and be in tax compliance for at least 5 years.

Make that a few thousand dollars, rather than a few hundred.

The current purely administrative price for the privilege of dropping US citizenship is a whopping $2,350, up from $450 in 2014 (and in some cases, $0 before 2010). The US recently sort-of blinked in the face of a class action lawsuit, finally agreeing to drop the fee back to $450 around a year ago, but so far has dragged its heels as a substitute for actually taking action.

On top of this $2,350 sit possible tax preparation fees. However, worth noting that tax compliance is not a strict prerequisite to renunciation. Aside from a vague warning at the interview, about how renouncing won't extinguish past US tax liabilities, there's no real interaction between the IRS and USCIS. It's obviously a good idea to effect a clean tax exit from the US where possible, particularly if it's all just paperwork with ultimately no US tax payable, but not strictly required by the renunciation process itself. A DIY final US tax return is time-consuming, but should not prove impossible for someone with straightforward finances and an organised approach.

For the OP, if for some reason renouncing is too bitter a pill to swallow, this article may offer some useful pointers:

Investing from the UK for US citizens and US permanent residents - Bogleheads

For someone with plans to move to the US in future, US citizenship is viewable as 'call option', albeit potentially an expensive one. For someone with no such plans, it can be nothing more than an unwanted and headachy US tax ball-and-chain.

Yes I read about the lowering of the cost back to $450 and thought that it had been implemented.

As part of my planning for a possible return to the UK I've thought about renouncing my US citizenship, but I've lived more than half my life in the US and while I have no family, I do have close friends, colleagues and an ex so there are emotional ties. Also all my finances are in the US and although not being a US citizen shouldn't affect them rules can change and I there's always the feeling that as a citizen I'll have a louder voice if anything goes wrong with Social Security. But for the OP I think renouncing is something to strongly consider.