FATCA and a warning to Brits in the US
by Alexander Beard, on Apr 23, 2015 11:31:40 AM
The Foreign Account Tax Compliance ACT (FATCA) became law in March 2010. A key focus of this piece of legislation is reporting by US tax payers of certain foreign financial accounts and offshore assets. It also covers reporting by financial institutions about financial accounts held by US tax payers.
The objective of FATCA is ensure the US Government gets its tax dollar of assets that US tax payers have hidden / not reported outside of the US.
As you can see a Brit expat in the US may well not consider themselves a ‘tax’ dodger as they believe they are paying the correct amount of tax in the US and UK but may have an issue as the majority of them will have left accounts / investments behind. FATCA will also look at the underlying structure of the account / investment and if they deem it non-compliant, there could be further taxes to pay. An example of this is an Offshore Investment Bond which would likely be deemed as a Passive Foreign Investment Company (PFIC) and would have its own tax consequences.
For a good number of reasons Brit Expats in the US may want to keep assets outside of the US denominated in Great British Pounds. There are IRS compliant investment options to cater for this scenario. This will allow a Brit Expat in the US to retain GBP investments outside of the US and become tax compliant. It will also allow them to manage currency risk by allowing you to switch to US Dollars should it be advantageous to do so (and back again if required).
We have some great investment solutions to mitigate the issues that FATCA reporting has introduced. If you have any questions, please feel free to contact your Alexander Beard financial planner.