UK-based investments for USA tax resident?
 

Interested in (non-binding!) advice from you guys.

I'm a UK citizen, but resident in US for tax purposes, and plan to be for a few years to come at least.

I recently came into some money via an inheritance, and am stuck in a bit of a quandary. With the GBP/USD exchange rate as terrible as it is (and probably not getting any better for a while), it doesn't seem to make sense to bring it over to the US. However, I've come to realize how punitive the US IRS are on foreign investments, making investing it in the UK a challenge too.

I don't want to leave it sitting in a UK bank account at zero interest, so does anyone have any experience of smart UK investments that are also smart from a US tax perspective? It appears from the research I've done that mutual funds are a no-go, are there any smart property investment vehicles (that don't involve actually buying a buy-to-let property etc)?

Imagining there must be some people in a similar boat, so interested in any opinions!

Thanks in advance.

Re: UK-based investments for USA tax resident?
 

A portfolio of individual shares, with enough industry diversity to be balanced for a risk level that makes you comfortable. 30-35 companies seems to be a range I see mentioned a lot, from people that build blue chip dividend portfolios and the like.

Alternatively, if you also have a fair-sized portfolio/ retirement fund over here, use the UK money to balance the risk: keep that as your fixed income allocation through high interest savings bonds, then have your US portfolio as all equity rather than 60:40 or whatever asset allocation you'd have otherwise used. Exchange rate risk is still a factor, of course, but there's little you can do about that without knowing exactly where you're going to be living, when, and what FX rates might be doing over that time. It's all part of the price we pay for expatting!

Re: UK-based investments for USA tax resident?
 

However, a possible scenario is that the British pound will gradually lose value long term, as Britain gets closer to Brexit etc. (For example.) in that event, looking back to now, you might wish you'd moved the money over to the US sooner rather than later.

Re: UK-based investments for USA tax resident?
 

Don't forget to file IRS Form 3520 for the inheritance & Form 8938 and the FBAR...

Re: UK-based investments for USA tax resident?
 

You have some choices if you leave the money in the UK and want to avoid PFIC

Put it in a long term UK saving account and get maybe 2%
Buy individual stocks or bonds.
Buy US Vanguard ETFs.....you can do this through brokers like H&L
Buy an investment property.

Re: UK-based investments for USA tax resident?
 

Be sure to let us know if anyone will let you open this type of account remotely.

I tried with hargreaves lansdown, but they said "no" because I was not living in the UK, then continued to bombard me with junk mail about opening their accounts.

Re: UK-based investments for USA tax resident?
 

Thanks, all. Interesting stuff.
Certainly would be interested in a low maintenance solution like Vanguard eTFs through an online broker, but hear you about whether they'll let me open it. And it's fair point re exchange rate in general...!
Appreciate the input. Thanks again.

Re: UK-based investments for USA tax resident?
 

Try AJ Bell. They definitely let you open a SIPP account when US resident (I've done it), but I'm not sure about dealing accounts. You will probably need to call or do on-line chat, because it is not clear from their website.

Re: UK-based investments for USA tax resident?
 

I remember the difficulty in recent threads about this coming for people being told their SIPP would close because they weren't a UK resident, and then trying to find a broker who would allow transfers into a new SIPP. If all you want to set up is a taxable account in GBP, it's easy to set up a GBP account with a US broker. I have one with Fidelity that I transferred a few shares of one of my old employers into, and the dividends are held there in GBP. How you transfer currency in, I'm not sure, but it should be possible.

Re: UK-based investments for USA tax resident?
 

Thanks guys.
I'm actually trying to keep this separate from a SIPP (which I'm trying to separately sort out, and considering the AMVEST scheme via Alexander Beard).
Thanks for the Fidelity advice, will explore that.

Re: UK-based investments for USA tax resident?
 

Be very careful with AMVEST. They are charging 1% entry fee and then 1.53% in fees. If you buy funds within your SIPP that are based on US indexes you will be investing in dollars, the treaty keeps your gains tax free and than you can use the treaty to avoid UK tax on the withdrawals, you'll obviously have to pay US tax....so what is AMVEST giving you?

Also they claim that any UK tax withheld at source can be set agains your US tax liability.....that's not correct. If you are a US resident you must pay the US tax in full and claim back any tax withheld in the UK.

Re: UK-based investments for USA tax resident?
 

You could buy some UK ETFs through a US investment company.

United Kingdom ETF List, Screener & News | ETF.com

I think Fidelity has a couple of the funds available. This way your funds are linked more with the UK economy.

Re: UK-based investments for USA tax resident?
 

Yep thats the best way to approach this. Get the money to the US and invest in GBP denominated things if you are worried about exchange rates.

Re: UK-based investments for USA tax resident?
 

Wait, my small brain is struggling to get my head round that thought(!).
One of my ambitions is to avoid bringing money over to the USA now and accepting a terrible GBP:USD exchange rate.
However, are you saying that if you bring it to USD (at a rubbish exchange rate), then invest in GBP-centric stuff, I've essentially not lost anything-because I'm buying the same amount of funds in GBP?

If I'm understanding that correctly, then the question becomes whether longer term that's a smarter play (ref Brexit/economic uncertainty) vs taking the hit in the short term on the exchange rate and hoping for better performance in US-centric funds.

Argh. Brain can't cope.

Thanks for the AMVEST note, too.

Re: UK-based investments for USA tax resident?
 

No, nun is not saying that. "GBP-denominated" means the asset is held in pounds sterling. But we're talking about doing that at a US brokerage.