Hello
Guest

Sponsored Links


Topic: What happens if a USC signs up to a S&S ISA?  (Read 1384 times)

0 Members and 1 Guest are viewing this topic.

  • *
  • Posts: 88

  • Liked: 13
  • Joined: Jan 2016
Re: What happens if a USC signs up to a S&S ISA?
« Reply #15 on: April 01, 2017, 08:29:26 AM »
Thank you!


  • *
  • Posts: 2603

  • Liked: 102
  • Joined: Dec 2005
Re: What happens if a USC signs up to a S&S ISA?
« Reply #16 on: April 01, 2017, 09:11:16 AM »
Cash ISAs are fine. You get the UK tax advantages and any interest is treated as bank interest on your US tax return. The only reason I'm dealing with the stocks and shares ISA headaches is because my kids were given money by their UKC grandfather and I put it into the ISA without really thinking about it, and so trying to make the best of a not great situation, as once in the ISA, only the kid can take it out and only once their 18.

As far as pensions, they are slightly different. If it is a UK company scheme and is regulated by the UK government as a pension scheme, it's probably covered by the US-UK tax treaty which means that the bs around PFICs disappears. Each year when I file, I do have to fill out an extra form making a treaty exemption claim because my UK pension scheme does not conform exactly to IRS standards (I put in 6% of my gross salary, and the company only puts in 5%), however I fill out the extra form and say that it's a recognized UK pension scheme. Not had any issues yet, but I'm decidedly small fry. 

I also report my full gross salary on my IRS return (in theory, I believe I could report my gross minus my 6% pre-UK income tax pension contributions) and perhaps pay a bit less US tax, but I believe the general guidance is to report your full gross UK income to establish a basis when you start withdrawing the pension.
Because you are investing more than your employer; are you bifurcating the plan and filing annual Forms 3520 and 3520-A for the portion that is considered a foreign grantor trust? Here is a discussion about the concept: https://www.irsmedic.com/blog/2015/03/foreign-retirement-plan-taxable.html


  • *
  • Posts: 153

  • Liked: 20
  • Joined: Jul 2008
Re: What happens if a USC signs up to a S&S ISA?
« Reply #17 on: April 02, 2017, 10:20:48 PM »
Because you are investing more than your employer; are you bifurcating the plan and filing annual Forms 3520 and 3520-A for the portion that is considered a foreign grantor trust? Here is a discussion about the concept: https://www.irsmedic.com/blog/2015/03/foreign-retirement-plan-taxable.html

Back in 2012, I wrote to the IRS people at the Embassy about this very issue and explained my situation including the 6% employee and 5% employer contributions. I told them my plan was to avoid the 3520/8621 paperwork by invoking Article 3 Paragraph 1 Subparagraph O of the US-UK tax treaty because my pension is definitely a standard UK pension as defined by the tax treaty. They said that would be fine.

I realise that any advice from the IRS comes with the caveat that they can tell you any old bullsh!t and you can follow it, but they aren't responsible if they were wrong, but I can only do so much. In fact, it might have been a comment you made back then that made me write to them in the first place! The worrying part is that I sent them a proper letter, and they sent one back, but I can't find their response now! 


  • *
  • Posts: 3902

  • Liked: 716
  • Joined: Nov 2012
  • Location: Eee, bah gum.
Re: What happens if a USC signs up to a S&S ISA?
« Reply #18 on: April 03, 2017, 08:02:05 AM »
Back in 2012, I wrote to the IRS people at the Embassy about this very issue and explained my situation including the 6% employee and 5% employer contributions. I told them my plan was to avoid the 3520/8621 paperwork by invoking Article 3 Paragraph 1 Subparagraph O of the US-UK tax treaty because my pension is definitely a standard UK pension as defined by the tax treaty. They said that would be fine.

I realise that any advice from the IRS comes with the caveat that they can tell you any old bullsh!t and you can follow it, but they aren't responsible if they were wrong, but I can only do so much. In fact, it might have been a comment you made back then that made me write to them in the first place! The worrying part is that I sent them a proper letter, and they sent one back, but I can't find their response now!

The IRS have a habit of using disappearing ink.
Dual USC/UKC living in the UK since May 2016


Sponsored Links





 

coloured_drab