Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

Tax: UK gifting, capital gains, move to GC

Tax: UK gifting, capital gains, move to GC

Old Jul 16th 2020, 1:05 pm
  #1  
Just Joined
Thread Starter
 
Joined: Jul 2020
Posts: 5
Ayoung550 is an unknown quantity at this point
Default Tax: UK gifting, capital gains, move to GC

This is a great forum and there is a lot of great information that I’ve looked through, but didn’t see anything specific on my questions:

For UK citizens who are US-residents (i.e. have a visa / pay taxes in the US)

I understand that a legacy UK-based brokerage account would need to be reported in the FBAR at the end of tax year and any income would be taxed in the US only, through capital gains tax but please correct me if i'm wrong!

1. What are the tax implications of being gifted money from a UK source? I understand this would need to be reported and likely taxed in the US - are the taxes punitive?

2. Has anyone run into trouble dealing with UK-based brokers, e.g. Fidelity who don’t seem to want to know that you moved abroad, is there a good way to declare that without having to sell?

3. What are the changes when someone moves from a visa to a Green Card – again I understand from this forum that GC holders need to pay tax in the US on worldwide income wherever they land up – is there anything else?

There look to be some very knowledgeable people here and I’m hoping avoid a $250 /30 min phone call, so really appreciate any help – hope you’re all keeping well 😊
Ayoung550 is offline  
Old Jul 16th 2020, 3:11 pm
  #2  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,204
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

I had a UK based ING account that would send me 1098 forms and submit relevant documentation to the IRS
mrken30 is offline  
Old Jul 16th 2020, 4:15 pm
  #3  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 48,513
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

I doubt a UK stock broker will touch you if they know you are resident in the US - that would put them in the purview of the SEC, and UK stock brokers are not SEC compliant. In fact equities in the UK are invariably registered with the explicit restriction that they are not for sale to US residents, because in addition to SEC rules covering stock brokers, the equities themselves are not SEC/ NYSE compliant either.

Gifts are not taxed by the federal government. A handful of states tax gifts on receipt i.e. the recipient has to pay the tax.

Last edited by Pulaski; Jul 16th 2020 at 4:46 pm.
Pulaski is online now  
Old Jul 16th 2020, 4:28 pm
  #4  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,204
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

I agree with Pulaski. My case was a bit of a headache, it was a forgotten ISA in the UK. Fortunately they made the tax issue easy, but I would not have invested in UK investments as a US resident willingly. If you want to invest in UK stocks transfer the money and use a UK or EU index fund bought via a US investment company. There are several low cost options. Or invest in US stocks which generally do better than UK stocks.
mrken30 is offline  
Old Jul 16th 2020, 4:45 pm
  #5  
Furby
 
Joined: Apr 2016
Location: Texas
Posts: 85
Glasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

I believe that any gift less than $100,000 from a person who is not and never has been a US citizen is not subject to US income tax. If it is from a company or entity of some kind then different rules apply. Google Form 3520 that should give you more information. This should also help https://www.irs.gov/businesses/gifts...foreign-person

With regard to tax on a UK brokerage account. Income in the form of interest and dividends is subject to regular income and capital gains taxes BUT any sales are subject to the PFIC taxation regime. Google that and you will find numerous sources of information. The simple explanation is is that you will pay federal tax on any profits at the highest rate of personal income tax that exists, not your marginal tax rate but the highest rate that is published which I think is currently at 37%. To that you can add state tax. In addition you have to prorate the total gain over the number of years that you owned the shares and pay interest at IRS rates for the gains apportioned to prior years. This includes any years you owned the funds prior to ever setting foot in the USA, getting a visa, green card, etc. The net result is that if you sell your profit will be subject to a minimum of 37% federal tax, plus state tax, plus compound interest which clearly becomes onerous the longer you have owned the investment. Add to that that personal income tax rates are likely to rise substantially depending upon who wins the election, and that 37% rate will likely look like a bargain with hind sight. The bottom line is sell those funds as soon as you can and reinvest in US mutual funds, unless you plan not to sell until you become a non “US person”.

To update your address with Fidelity you simply need to tell them and supply the required forms of identification. It is very straightforward and you do not need to sell anything. I am not sure why you state that they don’t seem to want to know that you moved abroad. Fidelity and all financial institutions are required to report to the IRS on any investments held by “US persons” which you are if you are filing US taxes. When you update your address they will require you to fill out an IRS tax form, I think it is the W8-BEN form. They will then report data including your balance, sales and income to the IRS and you will get normal IRS 1099 forms which makes filing taxes easier than if you do not have this. It may take them a few months to get around to this but because they are subject to massive penalties if they do not do so, they will be relentless in requesting this information. If not received in a reasonable time frame they will almost certainly close you account and withhold a substantial amount of your investment until they get it. If you do not update your address then they wont know that you are a US person, but I am not sure there is any advantage to that since you have to fill in the FBAR forms and are subject to the above taxation regardless. It is easier and more transparent if you have the 1099 forms.





Glasgow Girl is offline  
Old Jul 16th 2020, 4:50 pm
  #6  
Just Joined
Thread Starter
 
Joined: Jul 2020
Posts: 5
Ayoung550 is an unknown quantity at this point
Default Re: Tax: UK gifting, capital gains, move to GC

Thank you both very much, that's very useful.

Without wanting to sell up when i moved to the US, I left it in the UK and declared in FBAR. It sounds like it's not something I can touch if i'm based in the US (e.g.buy / sell unit trusts), since the brokerage firm won't be licensed with the SEC.

If i wanted to touch it as a US resident - the solution would be to sell and take the tax hit here, then transfer to the US and reinvest i guess.
Ayoung550 is offline  
Old Jul 16th 2020, 4:54 pm
  #7  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 48,513
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

Originally Posted by Ayoung550 View Post
Thank you both very much, that's very useful.

Without wanting to sell up when i moved to the US, I left it in the UK and declared in FBAR. It sounds like it's not something I can touch if i'm based in the US (e.g.buy / sell unit trusts), since the brokerage firm won't be licensed with the SEC.

If i wanted to touch it as a US resident - the solution would be to sell and take the tax hit here, then transfer to the US and reinvest i guess.
If you're in th US for the long term/ permanently, the sooner you bite the bullet and sell up in the UK, the easier it will be for you. As Mr Ken said, if you want exposure to UK equities and/or GBP currency exposure then invest in funds specializing in the UK, and/ or NYSE Depository Receipts of British companies.
Pulaski is online now  
Old Jul 16th 2020, 4:55 pm
  #8  
Just Joined
Thread Starter
 
Joined: Jul 2020
Posts: 5
Ayoung550 is an unknown quantity at this point
Default Re: Tax: UK gifting, capital gains, move to GC

This is extremely helpful - thank you so much for taking the time!
Ayoung550 is offline  
Old Jul 16th 2020, 7:35 pm
  #9  
Just Joined
Thread Starter
 
Joined: Jul 2020
Posts: 5
Ayoung550 is an unknown quantity at this point
Default Re: Tax: UK gifting, capital gains, move to GC

[QUOTE=Glasgow Girl;12882706]I believe that any gift less than $100,000 from a person who is not and never has been a US citizen is not subject to US income tax. If it is from a company or entity of some kind then different rules apply. Google Form 3520 that should give you more information.

With regard to tax on a UK brokerage account. Income in the form of interest and dividends is subject to regular income and capital gains taxes BUT any sales are subject to the PFIC taxation regime. Google that and you will find numerous sources of information. The simple explanation is is that you will pay federal tax on any profits at the highest rate of personal income tax that exists, not your marginal tax rate but the highest rate that is published which I think is currently at 37%. To that you can add state tax. In addition you have to prorate the total gain over the number of years that you owned the shares and pay interest at IRS rates for the gains apportioned to prior years. This includes any years you owned the funds prior to ever setting foot in the USA, getting a visa, green card, etc. The net result is that if you sell your profit will be subject to a minimum of 37% federal tax, plus state tax, plus compound interest which clearly becomes onerous the longer you have owned the investment. Add to that that personal income tax rates are likely to rise substantially depending upon who wins the election, and that 37% rate will likely look like a bargain with hind sight. The bottom line is sell those funds as soon as you can and reinvest in US mutual funds, unless you plan not to sell until you become a non “US person”.[/QUOTE]

This is so helpful thank you! The bottom line you state makes sense - if i was to get a Green Card - does that mean i would be subject to the PFIC regime, even if i move back to the UK then sell there? Assume so.
Ayoung550 is offline  
Old Jul 16th 2020, 8:46 pm
  #10  
Furby
 
Joined: Apr 2016
Location: Texas
Posts: 85
Glasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

I am afraid so unless you surrender your green card and even then it depends upon how long you had it. Honestly, as hard and painful as it may be you will be so much better off selling it all, re-investing and moving on. There may be a silver lining though. Depending upon when you bought, the poor current exchange rate may reduce your profits when translated to USD. Since you convert your purchase into USD at the rate when you bought it, and the sale into USD at the rate on the sale date you may find that your cost basis is inflated with a prior higher exchange rate and/or your sale price is reduced due to a lower current exchange rate. In any case don’t let the poor exchange rate stop you going forward. Many people have been waiting quite a few years for the exchange rate to recover and in the process lost out on significant US market gains. Personally, I don’t see it improving in the foreseeable future. Also, bear I mind that life has a strange way of not going to plan. Even if you plan to return to the UK any number of circumstances can mean that you do not. If you do sell, do it this year before the probable Biden administration hikes taxes. No politics intended, just a statement of the inevitable.
Glasgow Girl is offline  
Old Jul 16th 2020, 9:23 pm
  #11  
Just Joined
Thread Starter
 
Joined: Jul 2020
Posts: 5
Ayoung550 is an unknown quantity at this point
Default Re: Tax: UK gifting, capital gains, move to GC

Originally Posted by Glasgow Girl View Post
I am afraid so unless you surrender your green card and even then it depends upon how long you had it. Honestly, as hard and painful as it may be you will be so much better off selling it all, re-investing and moving on. There may be a silver lining though. Depending upon when you bought, the poor current exchange rate may reduce your profits when translated to USD. Since you convert your purchase into USD at the rate when you bought it, and the sale into USD at the rate on the sale date you may find that your cost basis is inflated with a prior higher exchange rate and/or your sale price is reduced due to a lower current exchange rate. In any case don’t let the poor exchange rate stop you going forward. Many people have been waiting quite a few years for the exchange rate to recover and in the process lost out on significant US market gains. Personally, I don’t see it improving in the foreseeable future. Also, bear I mind that life has a strange way of not going to plan. Even if you plan to return to the UK any number of circumstances can mean that you do not. If you do sell, do it this year before the probable Biden administration hikes taxes. No politics intended, just a statement of the inevitable.
Wise words and again, extremely helpful since this stuff is not obvious and it's hard track down information - I'm grateful
Ayoung550 is offline  
Old Jul 17th 2020, 10:46 am
  #12  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 2,577
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

Originally Posted by Ayoung550 View Post

3. What are the changes when someone moves from a visa to a Green Card – again I understand from this forum that GC holders need to pay tax in the US on worldwide income wherever they land up – is there anything else?
I spent the first 6 years in the USA on a visa and our taxes were handled by the accounting firm of the company I was working for. Even while on my visa I was taxed on my worldwide income including rental income from a house in England. I understand there are visas where you are not liable to US taxes on worldwide income but when I moved from visa to Green Card absolutely nothing changed in the income I was taxed on. Similarly no change in taxation when I moved from Green Card to US Citizenship.
durham_lad is offline  
Old Jul 20th 2020, 7:43 pm
  #13  
Just Joined
 
Joined: Dec 2008
Posts: 7
jt89104 is an unknown quantity at this point
Default Re: Tax: UK gifting, capital gains, move to GC

My experience with my stock market investments is similar to others: my UK fund manager insisted that I close the account when I moved to the US. They were not set up to deal with US residents.

So if you have UK mutual funds you might need to sell them. If you have individual UK stocks (Easyjet, Rolls Royce etc), I wonder if it is possible to transfer them to a US broker without selling them? I have previously transferred stocks between two different US brokers without selling them and crystalizing capital gains. I wonder if it would be possible to transfer them from a UK broker to a US broker or not.

If that does not work then I agree with the other posters that it is less drama and headache in the long run to bite the bullet and sell them. The likely weakening of the GBP in recent years (since the date you bought them) will cushion the blow of any US capital gains. If you want to keep your currency hedge by owning GBP investments, then use the proceeds to buy a low-cost FTSE tracker ETF through a US broker. The screen price will be denominated in USD, but the underlying value will be a GBP exposure. It will rise in USD terms if the GBP strengthens and fall it if weakens, even if the FTSE 100 stays flat.
jt89104 is offline  
Old Jul 20th 2020, 7:54 pm
  #14  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 48,513
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Tax: UK gifting, capital gains, move to GC

Originally Posted by jt89104 View Post
..... I wonder if it is possible to transfer them to a US broker without selling them? I have previously transferred stocks between two different US brokers without selling them and crystalizing capital gains. I wonder if it would be possible to transfer them from a UK broker to a US broker or not. ......
UK stocks are not compliant with NYSE and SEC rules, and cannot be traded in the US or by a US resident. ..... Which is why British companies already listed on the LSE trade their stocks on the NYSE as ADRs (American Depository Receipts), which means that the investment on the NYSE is backed by a deposit of shares of the issuing company. US shares commonly trade in the range of $10-$90, and sometime more (sometimes a lot more!), whereas shares in London commonly trade in the £1-£10 range, which would be classified as "penny stock" in the US, so typically an ADR will be backed by multiple shares of the issuer, but only the issuer can "package" a bundle of shares from the UK and create an ADR.
Pulaski is online now  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.