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To Invest in the US or UK Stock Market whilst on assignment

To Invest in the US or UK Stock Market whilst on assignment

Old Mar 22nd 2015, 1:46 pm
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Default To Invest in the US or UK Stock Market whilst on assignment

Hello all! I'm hoping to get some advice on the relative pros and cons from a tax perspective for investing in either the UK or US stock market whilst a temporary resident in the US.

To give you some background - I've been in the US for approximately a year on an L1 visa and would guess I'll be here for another 3 or 4 years. My salary is currently split between USD and GBP, with each amount going to the US or GB respectively. The bulk of my forthcoming savings will come from the GBP denominated portion, however my company is happy to move the money into USD as part of my monthly pay check if needed (although perhaps not hugely desirable at the current forex rate). I have no other investments and own no property. Probably approx 30% of the sum I invest will need to be withdrawn when I return to the UK to use as a deposit for a house.

I'd be very grateful for any advice from members of this site that have found themselves in a similar situation. Any info about optimal times to sell for either US or UK shares (i.e. before or after moving back, again from a tax perspective) would also be greatly appreciated.

On a final note - my company employs a consultancy to provide support for these types of tax questions, however I've found them to be frankly more confusing than helpful, so I wanted to see if any of the esteemed members of this site could provide clearer information.

Thanks.
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Old Mar 22nd 2015, 2:53 pm
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Default Re: To Invest in the US or UK Stock Market whilst on assignment

There are confusing and almost random reasons (the reasons are arcane accounting differences) for why foreign equity investments are treated in one of two different ways on US tax returns. If you're lucky "Michael" will come along and post one of his detailed and informative but lengthy explanations, or you could try searching the forum for his posts on investment topics.

Suffice to say, unless you want to wrestle with a more complex annual tax return, you should only invest in the US stock market while you are obligated to file US tax returns.
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Old Mar 22nd 2015, 4:36 pm
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Default Re: To Invest in the US or UK Stock Market whilst on assignment

Originally Posted by Pulaski
There are confusing and almost random reasons (the reasons are arcane accounting differences) for why foreign equity investments are treated in one of two different ways on US tax returns. If you're lucky "Michael" will come along and post one of his detailed and informative but lengthy explanations, or you could try searching the forum for his posts on investment topics.

Suffice to say, unless you want to wrestle with a more complex annual tax return, you should only invest in the US stock market while you are obligated to file US tax returns.
+1

I would also suggest that you stick with ETF funds that report into HMRC. That way they will receive the same favorable tax treatment as UK funds once you return to the UK and pay UK taxes.

There are quite a few US funds, and the list is updated each year.

https://www.gov.uk/government/public...eporting-funds
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Old Mar 22nd 2015, 8:37 pm
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Default Re: To Invest in the US or UK Stock Market whilst on assignment

Probably the biggest disadvantages of investing in UK securities directly is that you may not be able to tell if the dividends are qualified (taxed at a lower tax rate) or non qualified (taxed at normal income) plus trading securities on foreign exchanges are typically more expensive than on US exchanges.

If you purchase US ETFs that hold foreign securities or ADRs (foreign companies listed on the US exchanges) on the US exchanges through US brokers, the year end 1099 will indicated the amount of dividends paid that are qualified and non qualified.

Most US brokerages offer low expense ratio commission free ETFs. The following are the commission free ETFs offered by TD Ameritrade.

Commission-Free ETFs

I suspect a many foreign brokerages don't allow US resident accounts since they don't want to deal with the FATCA reporting. However you can still trade on foreign exchanges if desired through most US brokerages (except TD Ameritrade). However the commission is higher than trading US securities and I suspect that the brokerage won't get notified as to whether the dividends are qualified or not and therefore will likely be reported as non qualified on the year end 1099.
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Old Mar 23rd 2015, 3:48 pm
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Default Re: To Invest in the US or UK Stock Market whilst on assignment

If you are a US resident stick with US investments. If you return to the UK you can either sell them and repatriate the money or think about getting them into UK reporting ETFs.

I'm curious about your wage split. I assume you are paying US income tax, but how is your payroll tax arranged? Do you have access to any company retirement account. On an L1 there are some special arrangements available.
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Old Mar 24th 2015, 8:06 pm
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Default Re: To Invest in the US or UK Stock Market whilst on assignment

Personally I would just stick it in a 401(k) if your employer has got one.

Or you can put it an IRA which largely eliminates the tax issues but the contribution level is quite low.

If you're not going to do that then definitely US investments because of the qualified dividends that Michael mentioned which you should probably look up.
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