freddie_freeloader

Hi

I am a non-UK resident for tax purposes with a UK brokerage account. I already file a UK tax return related to a UK rental property but have not previously needed to file a UK return related to a trading account. Are there any issues I need to be aware of or do I just add any income / cap gains etc related to my account to my UK filing or is there anything else to be aware of?

Regards

Arb

durham_lad

If you have funds in a UK brokerage account generating dividends and capital gains I would be more concerned with my IRS tax return as those funds could well end up being classified as Passive Foreign Investment Companies and be taxed punitively plus a bunch more forms to file. The UK filings are trivial in comparison, I report dividends and cap gains from US funds on my HMRC return every year. (USC living in the UK).

freddie_freeloader

Thanks. This is my concern as its not a large sum and so I would want to avoid additional prep costs for my tax return which are already pretty high. I am thinking might be more effort than its worth.

Glasgow Girl

From the IRS perspective It all depends upon what you have and the value. If you only have cash, bonds or shares in individual companies (not Unit Trusts, OEICS or Investment Trusts) then the hassle is limited to filing an FBAR if the aggregate total of all investments is over $10,000, and Form 8938 if the aggregate total of all investments is more than $50,000/$100,000 single/married at the end of the calendar year (or greater than $75,000/$150,000 single/married at any time during the year). Those forms are annoying but don’t take too much time to complete and are easily completed and filed online by anyone who takes the time to read the instructions.

If you do have Unit Trusts, OEICs, or Investment Trusts then you are also subject to PFIC reporting and draconian taxation. The reporting is onerous. Form 8621 is required annually for each separate fund and IRS estimates that the form may need up to 40 hours to complete which is probably reasonable for the first time completing the form. After that it should take a lot less but still plan on quite a few hours per fund to gather the necessary details and complete the form. The taxation of these funds is different from normal capital gains and is so punitive that it is very hard to come out ahead. If you have such funds you probably should look at getting rid of them asap and reinvest in funds through a US brokerage. But if you do so, make sure you understand the taxes you will have to pay on a sale first. There are several threads on this forum outlining those taxes.

LegalEagleTX

If you are tax resident in the U.S. you are taxed on your worldwide income. You are also taxed in the UK on your income with a source in the UK, subject to the Double Tax Agreement between the U.S. and UK. Any tax paid in the UK on income with a UK source is generally credited against the U.S. tax on that income. This is the general rule of thumb. Exceptions abound and professional advice may be required.