J.JsOH

Hi,
FYI, this is a bit of info I learned this week.
No alarm but just to say something is in the works.

HMRC has recently asked all UK ISA providers to identify US Persons with ISA's.

This came to me from the Post Office where I have an ISA, and the question on a pamphlet (of the kind that I usually just throw away) asking for US persons to contact the PO.

When I called they wanted to know if i was UKC as well as USC, confirm my address etc.
Agent said that this was because of a request from HMRC to all ISA providers and that it is an info collecting activity. No action is planned for 2012 and no reason that I shouldn't take out new ISA's

I do report my ISA interest on my US Fed filing, so far with no consequent US tax due.

jbrown

This is probably related to FACTA. The US is increasingly requiring foreign banks to enter into disclosure agreements. Who advised you that no US tax was due? Income from UK ISAs and SIPPs are taxable in the US.

nun

Yes this sounds like FATCA, but why is HMRC doing the IRS's work?

It's good that you report the ISA interest on your US taxes. Do you have a cash ISA? If so all you need is to enter it on Schedule B and the 1040. However if you have a stocks and shares ISA that is a foreign trust and to have to file forms 3250 and 3250-A. You should also file FBAR and FATCA if you reach the thresholds.

J.JsOH

UK ISA's etc are liable for taxation in the US if you are USC.

Liability and reporting does not necessarily mean that you will pay tax on.

This non-due can come about if you have paid sufficient tax elsewhere to cover the income or have less income than the personal allowance (standard deduction)

J.JsOH

I stick with Cash ISA, not Stock ISA. It is appropriate to reduce longer horizon investments as we enter retirement (60's here), so in UK I am choosing more stable income generators. Besides, the higher tax penalty from US makes it less attractive to hold UK Stock ISA's.

I been filing FBAR since it started (under it's original guise of tracking money laundering by terrorists, not as a tax tracking tool).
FATCA's high levels of entry for married abroad are not likely to present a need for me, and if they ever do, well a bit more paperwork won't hurt or I'll just have to spend a bit more somewhere to keep funds down below the threshold.
I am staying aware that can't take it with me when I peg out

jbrown

Indeed, that occurred to me as soon as I'd posted, but I thought I'd leave it there in case

Stocks and shares ISAs are definitely less attractive in the context of a US tax return.

J.JsOH

Moving away from original topic but related to US Tax FBAR and FATCA;

does anyone know if a frozen UK Pension Fund held by a previous UK employer is considered to be having;
"financial interest in or signature authority over a foreign financial account" for purposes of FBAR
"specified foreign financial assets" for purposes of FATCA.

Thanks

robin1234

I have that situation, and I've assumed it needs to be reported on the the IRS Form 8938 (i.e. FATCA) with a value of $0 listed "..If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use a value of zero as the maximum value.."

But I've assumed it does not need to be reported on the FBAR. Others disagree, and quote obscure chapter and verse.. but I rely on the definition of a financial account right at the beginning of the FBAR instructions.

J.JsOH

Thanks for your insight, I am of the same mind.

Thoughts of relevance of a frozen foreign pension fund came to mind re; FATCA when I recently read the instruction "any financial account" maintained by an FFI" and me being back now in UK and nearing retirement this UK frozen pension came to mind.

Although I have been reporting FBAR since it's commencement I never had the same sense that it covered a frozen pension fund - but then it never occurred to me to consider if this UK frozen-away pension would be FBAR reportable, it was out-of-sight, out-of-mind, there was no regular updates on fund value and as a pension fund I don't have signatory authority over it. On another look today, I presume it could be read that I have a financial interest in it.
The day will come when it is mature and then I will get option to move it to another pension fund but it's not an account that I can make more deposits or take it all out and so could not be used per the intent of FBAR report "to circumvent US law".
As often with tax requirements, specifics are hard to find and much is left to interpretation.