Ha, take that HMRC!

I'm a UK/US dual citizen and my future will probably involve a scenario where I'm resident in the UK and taxed on my worldwide income on an arising basis, and obviously the US will tax my worldwide income too.

My area of concern has long been the Catch 22 situation I'll find myself in when it comes to investing in pooled investments like mutual funds outside a retirement wrapper. For a US citizen it's a very bad idea to buy UK pooled investments as they fall under US PFIC tax rules. If I buy US based mutual funds then HMRC will tax any capital gains as income and there's no CGT allowance. UK CGT rate is 18%.

Well I just did a quick calculation given my income needs and my UK income tax rate comes out at 14%.......So my question is now: if I've paid 15% CGT in the US can I use that to offset income tax due in the UK. If I can it seems that I'd have no tax due on the capital gains of the US mutual funds and the UK would have actually lost 3% tax on anything above the CGT allowance.

Have a look at HMRC SA106. More then likely there is a limit, similar to IRS 1116.

Actually it looks like quite a few US mutual funds have reporting status. I just found an HMRC spreadsheet that includes many Vanguard mutual funds. I'll post it in a new thread.