Surrey’s Premier Lifestyle Magazine

UK investment and US reporting

Gillian Everall of Everfair Tax offers guidance to essence readers on investment strategies in the UK and their impact on the US reporting status.
US citizens resident in the UK for a medium to long term will often consider investing in the UK, and in many cases individuals invest in pounds sterling as it appears a straightforward and attractive proposition. However, US citizens are required to annually file a tax return to the Internal Revenue Service (IRS), and there are a number of hidden traps to be aware of and manage accordingly.

The IRS require the return to be reported in US dollars, and an unwelcome surprise can occur if the US individual has assets that have been bought and sold in a different currency. In such circumstances the taxpayer must use the prevailing rate of exchange on the date of acquisition and disposal to report, and should exchange rates have fluctuated significantly during the holding period, it is possible to generate dollar gains where no gain in the currency of trade has been used.

Some foreign investment vehicles are accommodated by the IRS, but they often require significant annual reporting to allow the funds to be monitored. Here, although they may not be able to tax certain types of investment, if not reported, the IRS has the ability to apply punitive penalties for failure to notify. Therefore, it is imperative that the taxpayer is aware of any reporting requirements and to correctly report on them.

These investments include personal pensions which need to be reported to the IRS independently and annually, and company pension membership which is included on the tax return submission, but requires specific reporting by the tax preparer.

But it is the Individual Savings Account that can create the greatest complications. Although tax free in the UK, the cash ISA and stocks and shares ISAs are not tax free for US purposes. Interest earned on the cash ISA is taxable as ordinary interest on the Federal Tax Return, but income generated by the stocks and shares ISA creates enhanced and complex reporting requirements, along with exposure to the highest Federal income tax rate. Therefore, it is not unusual for gains made within the investment to be significantly reduced by both the US tax impact and the associated tax preparation fees.

We would recommend that taxpayers always review their overall investment strategy with both their wealth management advisor and a tax professional who can advise on both the UK and US tax implications. And if you would like some assistance, please call Everfair Tax’s friendly team on 01932 320800, email, or visit the website
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Gillian Everall is Managing Director and Head of Private Client Tax Services for Everfair Tax based in Weybridge. Everfair Tax specialises in UK, US and Expatriate Tax and provides a unique tax advisory and compliance service to help manage personal or international complexities and the changing of family or business circumstances.
Telephone: 01932 428536