US/UK dual nationality - can I invest?

1wayoranother

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.

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.

Thank you, this is really helpful. I think the relinquishment fee is currently about $2,500 which is not inconsiderable but the complications it is causing are, as you say, more trouble than its worth.