Identifying whether a fund offered by UK organizations is US/UK Tax Treaty recognized

squirrelpie

AFAIK you can't put a money market fund (or any other fund) in a cash ISA. Only cash. See e.g. https://restless.co.uk/money/savings-and-investments/whats-the-difference-between-a-cash-isa-and-a-money-market-fund/

Justice68

Bostonerimus1 said:

Justice68 said:

I was under the knowledge the cash ISA's interest gained, is taxable by IRS e.g. they do not respect the wrapper, however that unlike stocks ISA's, cash ISA interest is not seen as PFIC (and thus does not incur the additional tax [and paperwork])?

If that's not the case then I better move all my cash ISA to an English family member promptly

You need to be careful about structures here. The IRS doesn't recognize an ISA so it looks right through it and will tax anything inside. An S&S ISA will be bad news for US tax payers if they hold a UK mutual funds inside as they are PFICs. You might squeeze out some advantage by holding individual stocks as these will avoid UK tax and just be taxed regularly by the IRS. For cash ISAs if they are just saving accounts then there will be no PFIC issues. But things like money market funds will be PFIC.

I do appreciate the reply though can we clarify some thing as I may be misreading based on a few comments you've provided thus far

CASH ISA:

1. Does the IRS care about all the money in the account, or only the interest that is being gained on it?
Or rather I should say, they IRS loves money therefore they care about all of it however they can only tax the interest( since the original deposited money was already taxed by the UK)?

2. Does the IRS consider the money in cash accounts as income or something else.?

In event it's something else do they give you a separate threshold (similar to Foreign Income, which I believe is about $135,000 limit currently)

Should that be true then it may be moot for most persons as they might never break the ceiling annually, and thus like their FEIE, never pay any tax at all


3. Does the US/UK tax treaty cover cash accounts?
Then I would expect the larger of the two countries wins out and UK likely is the higher (for your average wage earners) tax

If it's not protected and they tax it's entirety, then that is that not a double tax occurring given that the cash initially was already taxed by UK 

Bostonerimus1

The IRS will tax the interest on any cash savings you have. The amount of tax you pay will be determined by US and UK taxation rules and the tax treaty. You will also need to comply with FATCA  and declare your foreign accounts about the threshold to US Treasury.

Earned income would be wages and you'll pay income tax on that. If you then put that money into a cash savings account only the interest on it will be taxed at the relevant rate.

As a US citizen your worldwide assets are taxable by the US and as a UK resident you are also liable to UK tax. Cash saving accounts are included in the treaty and along with domestic rules that will determine the amount of tax you pay to the UK and the US.

Justice68

OK thank you for clarifying, that is more in line with what I was to understand from previous researching

I think with FATCA most persons are in the clear in terms of taxes as the threshold is pretty high, whether single or married 
here is an excerpt from the requirements chart: 

Specified individuals living outside the US:

• Unmarried individual (or married filing separately): Total value of assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.
• Married individual filing jointly: Total value of assets was more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the year.

Specified domestic entities:

Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the tax year.