DebzinUS

My two sons live in the US with their families. I want to be able to move freely between the two countries and stay for as long as I want. Maybe even work here again. I am as British as they come. Always have been, always will be, USC or not.

MrMuffin

Exactly. Me too. I held out from getting my US Citizenship for 25 years because of what LGabriel73 said earlier. I have never thought of myself as an American... always a Brit. I got my USC for my wife and kids' sake otherwise I wouldn't have done. Filing a tax return every year is merely paperwork.

theOAP

As was asked for in the OP, I was hoping for responses from other USC's now living in the UK. I know they're out there.

DISCLAIMER #1 - Everyone's situation is different. Your unique situation may, or may not be,.........blah, blah, blah.
DISCLAIMER #2 - I've just checked; I'm not wearing a tin foil hat, but I have been accused of being pragmatic. I do not scaremonger, but I do respond in a straightforward manner when I have experience of a situation.

First, you have experienced living in a foreign country while having UK citizenship. UK citizenship, in this instance, is benevolent. It is non-intrusive. US citizenship, for those living outside the US, is intrusive and it's not benevolent. There's no comparison.

Let's start with the basics. There are two kinds of US citizens living abroad: those that are living temporarily abroad (most US expats), and those who have decided to live abroad permanently. There is a world of difference between these two. You must first decide (in the event of acquiring US citizenship) which you want to be. This is very important.


US citizens temporarily abroad always intend to return to the USA. It doesn't matter whether they spend 5 months a year, every year, back in the UK, or they're there on a 4 year secondment. The US citizenship is the predominant citizenship. The UK citizenship is always secondary. The controlling centre of their finances will always be the US, although all their assets may be in the UK (more later).

It's important to understand the US attitude to dual citizenship. Look at your US passport. Go to the fine print in the front. Read, very carefully, the text under Dual Citizens. In essence, it says: don't ever call us, and we intend to never call you when you're in the country of your other citizenship. BUT, we do still expect tribute (your fair share) even though we will offer you zilch in return while you're there.

If you understand and accept all of the above you will have no problems having dual US/UK citizenship.


Then there are those USC's who intend to live permanently abroad.

Someone in a previous post mentioned US taxes could be an "inconvenience" (God give me strength). Since this is the most talked about aspect, let's explore it further. We'll break it down into 2 topics: 'Normal Life in the UK as a USC', and 'Certainty'.


Normal Life in the UK as a USC.
When you return to the UK, it's likely you'll have a next door neighbour. That neighbour will be able to have a stocks and shares ISA; they'll be able to have a personal pension plan if they wish, they'll be able to take advantage of investment firms in the UK; they can take advantage of high income savings with a 'portfolio' content offered by their bank; they'll be able to start a business; they can become partners in a firm of solicitors or a dental practice; they can be the treasurer for their church or the kids football team; they can bank and invest where they please with no questions asked; they can have retirement benefits such as a 25% lump sum from their pension; they can write a will and can be certain of their wishes for their estate without hiring a team of cross boarder attoneys. You can have all of the same, but you'll have to decide whether your army of accountants is large enough. (In fact, that bit about investment firms is not true. As I understand it, 15 of the top 16 firms in the UK will not allow 'US Persons' to be clients. Only Hargreaves allow them.)

That neighbour may fall on hard times. They'll be able to depend on benefits: child credit, carer benefits, unemployment, council grants, etc.. You can have all the same, but again, you'll need to decide if your army of accountants is large enough.

Neighbours #1 son (not a USC) has met the girl of his dreams. He can be sure the bride to be will not back out of the pre-nups when she discovers that having assets 'together' does not require her telling all to the IRS. Neighbours #2 daughter (not a USC) has met a mad hippy artist who wants to live in a council house and on benefits. Your neighbour does not have to explain why daughter should not claim any of these in her name.

Please notice: I haven't talked about the 'inconvenience' of actually filing tax or information forms, or of owing (or not) US tax.


Certainty.
I'll start this with a bit of history. In the 1960's, being a dual US/UK citizen wasn't bad. Then came the 1970's and the FEIE (Foreign Earned Income Exclusion) was abolished. Suddenly, over night, US expats could not afford to live abroad. It's on the record (Goggle: Roger Conklin) that many were forced to return to the US and abandon everything where they had been living. The number of US expats decreased significantly. Jimmy Carter (President) re-established FEIE in 1980. USC's could afford to live abroad again. In fact, I moved to Europe in 1981.

Then came 9/11 and the Great Recession of 2007/08, and the (hubristic) US went all weird again.

In 2004, AMT became a hot topic. No worries, it's only for the rich, except the threshold for MFS was quite low. Many expats found they had to complete the AMT form. No worries, Form 1116 to the rescue,.. except 1116 had hidden in the small type that FTC's for passive income could only be 90%. The result; many expats unexpectedly paid tax to the US that year. The following year, the small type disappeared. Prior to 2006, most expats used the FEIE and 1116 for passive or excess general. Senator Chuck Grassley put end to that with the stacking rule. Since then, most have to use form 1116 only. In 2010, the HIRE Act was passed, complete with FATCA. In 2010 Form 8938 didn't exist. It now comprises 75% of my return. For 2013, we now have the FIIT (the Obamacare tax). Hell, I don't even know what Obamacare is. I can't have it in the UK, but I still may be liable for an additional 3.8% of tax on my US return thanks to it. And, I can't use FTC's to offset it (wrong part of the Code).

Cook_County is now talking about '988 transactions' (gains on foreign mortgages) in the US Forum. It may be unknown this year, but come next year, and it could be the new hot topic. With US tax, you never know what to expect from one year to the next. There is no certainty and the surprises can be nasty if you're a USC living abroad.

This is long, so I'll stop for now.

Having dual US/UK citizenship may not be a problem, but that IF in the title of this thread is really quite important.

nun

Well theOAP I can see that this is a topic of some interest to you

The points you make are excellent and I'd like to add one over arching observation.

If you are thinking about taking dual citizenship you must understand all the potential consequences associated with the various scenarios for your future. Too many times people jump without understanding what they are doing.

If you are a British citizen with a Greencard I don't really see many advantages of getting US citizenship other than being able to vote and potentially getting a security clearance as long as you give up the UK passport. If you are planning on returning to the UK and not returning to the US I would actively avoid US citizenship because of all the financial complications a US citizen has abroad.

If you have considered all the implications of dual citizenship, but family and freedom of movement issues are more important than taking US citizenship might be the right move.

Here is my personal path to dual citizenship and the issues I've discovered.

I came to the US in 1987 on an H1 visa and eventually got married and got my Greencard. I then decided to take US citizenship as I did not see myself returning to the UK, wanted to be able to get a US security clearance, vote and protect my US benefits; at the time Sen. Simpson was talking about restricting SS benefits to non-citizens, although that went nowhere.

Subsequently I got divorced, decided I would not work in any job that required a security clearance and the possibility of moving back to the UK to look after an ageing mother has become a reality. So I now find myself as UK/US dual citizen with 100% of my assets in the US and having to deal with the restrictions you mention in your post. In fact I'm not that sad at not having access to the UK investment industry as a US citizen and having to do it all in the US as the UK industry is a rip of, IMHO.

Thinking of the whole foreign exchange gain tax issue on things like mortgages got me to thinking if that would also apply to each mortgage payment you make or to credit card payments ie you buy something on Jan 1st, but don't pay the credit card company until Jan 30th. If the dollar increases in value against the pound between those dates you'd have a ForEx gain.


Bottom line is that becoming a dual citizen is not trivial. If you need it for family reasons they probably trump other considerations, I would not do it otherwise and whatever I would want to understand all the implications.

ncoomber

Thanks OAP and the other posters: I did not know this. I will look more into this

toko

Dear OAP - you have opened our eyes to considerations we had not understood before. I was under the belief that essentially the UK didnt care if you had dual citizenship. It certainly is a concern to 'put at risk' the ISAs, pension, benefits of a 'sole' UK citizen as you outline.

Dear all - many thanks for the insights and experience. Our key interest as parents is to maintain that 'come and go' flexibility for us and our kids (who have spent half of their lives in the US and may wish to continue to do so). Can this be achieved on a green card - my understanding is that once you are no longer primarily resident in the US, then there is pressure for the green card to be handed back. Is that correct and how do you maintain green card status? If you relinquish your green card and say in 10 years want to move back to US, do you have to go through the whole visa/work permit approach from scratch?

Again, many thanks in anticpation and for those of you who give time to address these inquiries.

lgabriel73

You can apply for a document that allows you to remain for a couple of years outside the US but there has to be certain reasons for doing so. If you stay out of the US for Six months more then you are seen as not meeting the residency requirements. The green card us only valid for being permanent resident in the US. Once you give up your green card you would have to start all over again if you decided in a few years you wanted to move back to the US.

BritInParis

What are the consequences of being a US citizen living abroad who doesn't bother filing every year with the IRS?

Several of my friends are USCs living in the UK/Europe, US-born and then British by descent/naturalisation, and I bet they don't even know that they need to file anything with the IRS.

nun

The UK doesn't care if you have US citizenship, but the US does "care" because it taxes you on worldwide income based on citizenship not residency.

There's no prohibition against a US citizen having a stock ISA, UK pensions, a UK business or getting UK benefits, it's just that some of those come with onerous US tax requirements. Also some foreign financial institutions won't deal with US citizens because of US tax implications. Therefore, to be a long term US expat you must organize your financial affairs carefully and come up with strategies to minimize your foreign financial footprint to simplify your US taxes while also considering UK tax regulations. there are ways to avoid the higher taxes and compliance requirements imposed by both countries on certain financial accounts, but you have to know what to do or employ someone who does to avoid issues in all but the simplest of cases.

robin1234

Exactly. I gave up my green card in 1980 and I reapplied for a visa in 1990. It was exactly the same process, even down to the strange "medical" in London.

nun

There are potential fines for failure to disclose certain foreign financial accounts. While you are required to file a US tax return if your income is above a certain level there is no penalty for not doing so, but if you owe any US tax and don't pay it interest is assessed on the amount each year.

FYI any USC who does not file US taxes is a fool because they potentially miss out on tax credits and will have a difficult time becoming compliant if they move back to the US.

JAJ

I would dispute the "not benevolent" tag. But the first part of the statement is true. United States citizenship is generally more "intrusive" on the lives of its citizens living long term outside the United States, compared to, say, British or Australian citizenship.

There is no need to pay thousands of dollars to accountants, but knowing how to file U.S. taxes and information reports is a necessary life-skill for U.S. citizens overseas. If living in a high tax country - Britain, Australia, etc. - then there will usually be no additional tax to pay. But not always. Tax advantaged investments, such as ISAs, aren't tax free to a U.S. citizen. Get a 25% pension lump-sum, and you'll likely owe U.S. tax that year. Sell your home and make a $750k capital gain, you'll owe U.S. tax even if the capital gain is exempt where you live. If your estate is worth over $5.34m when you die (2014 limit), then it's liable for U.S. federal estate tax. And so on.

So over the course of a lifetime, a dual U.S./Australian citizen (for example) living in Australia (for example), is likely to pay more in taxes at least some of the time than a sole Australian citizen in exactly the same circumstances.

Go to live in a "lower tax" jurisdiction - Dubai, Isle of Man, Singapore, Hong Kong, etc., then as a U.S. citizen with a you will almost certainly pay more significant sums of additional tax to the United States, annually. As an Australian citizen in these places, it's less likely you'll be paying Australian income tax - although not impossible, since a short-term expatriate may not be able to break Australian tax residence so easily.

So there is definitely a lifetime additional "cost" to being a U.S. citizen, outside the United States, compared to not being one. Is the cost worth it? Further to what OAP says, for those who intend to move to, or return to the United States in future, the cost is worth it. It has to be. This includes those who who live in politically unstable countries, who need to keep options open. Others, whose home country passport offers poor visa free travel options, may see the value in keeping a United States passport for general travel, even without the intention of living in the U.S.

On the other hand, those settled permanently in developed, stable countries, who have acquired British, or Canadian, or Swiss citizenship, may question the long term value of keeping their United States citizenship. If intending to spend their entire lives outside the U.S., as opposed to a few years, then the "cost" is higher and the benefits, fewer. Some have few personal or other ties to the United States. A small number in this situation have renounced their U.S. citizenship, or are intending to do so. Most are keeping U.S. citizenship. Still, although there are few former citizens openly regretting their decision to renounce, this may well change in the future. Life circumstances change and some who renounced U.S. citizenship because they thought they would never want to return may realize they have made a mistake. One that cannot easily be undone.

I would still say that for the vast majority of people, the benefits of being a U.S. citizen, and the options it can bring in life, outweigh the cost.

Those who have the opportunity to become citizens (before leaving the United States) should consider that a decision not to proceed is almost as significant as the decision of a U.S. citizen to renounce citizenship. If taking this decision, to not proceed, be sure it is for the right reasons.

robin1234

My son, dual US UK citizen, has lived and worked in Britain since 2007. He's rented, had low savings, had a modest salary like most young lads in their 20s. He's now started to climb the ladder, and has always been very prudent and frugal ... so I believe his modest savings entered the over $10,000 zone in 2013. He also has a defined benefit pension and recently started a cash ISA.

So here I am in England, enjoying my ten week holiday which is a recce for maybe buying a pied a terre and confirming that I'd like to live here, so I'm seeing my son at weekends for walks, visiting medieval churches, pub lunches etc.

I've ventured on The Conversation two or three times. Did you know that you should have been filing a US tax return. You really need to file a FBAR this year, as you now have savings over $10,000. If you file a FBAR, you can no longer avoid filing the tax return ...

He listens politely but is a bit bemused. US taxes? FBAR? What's that again? But I'm British, live in Britain, doesn't PAYE take care of all that? My little savings accounts pay interest net of income tax, don't they? So it is a hard sell.

theOAP

Let's hope they don't live in France, and bank with AXA.

http://www.lepoint.fr/economie/axa-b...1788961_28.php

"Axa Bank closes accounts of its U.S. customers in France!" The article is dated 06/02/2014. There are other French articles, but they're behind pay walls.

AXA is closing the accounts of anyone who is a US Person. That includes not only passport carrying USC's, but anyone with a US place of birth (which makes them a USC), even if they only lived there for a few days after they were born and are a full fledged French (or EU) Citizen now living in France. If I understand the article correctly, the person interviewed in the last several paragraphs was discovered because their bank records included a US place of birth.

It's the result of FATCA.

This is not only happening in France, but several European countries including Switzerland, the Netherlands, and Germany. Currently, there are a very limited number of accounts in the UK forbidden for US Persons at various UK High Street banks.

If they are a US Person in Switzerland, they will only find 2 or 3 banks opening new accounts. The accounts are very basic current and savings accounts only. Obtaining a mortgage in Switzerland for US Persons is impossible.

Once they have been 'exposed' by their bank in this manner, they may want to investigate the IRS/US Treasury implications.

WEBlue

I have a dual child living in the UK in pretty much the same circumstances as your son, but mine IS actually filing, though not liking it much.

But I have a few dual friends back there who don't file with the IRS and have no plans to. They don't plan to ever live in the US, and say that if they should ever change their minds and want to move Stateside, they can probably file the previous three years and be fine.

One is considering renouncing his US citizenship in case he someday does make enough money to owe substantial US taxes.