Moneyfarm for SIPP?

Hey everyone,

Following up on my recent post about planning for retirement while self-employed I wanted to ask if anyone here has heard or dealt with Moneyfarm for their SIPP. They seem to be FATCA compliant, but only accept investments under their specific portfolios. My question is - wouldn't this mean they're classed as PFIC?

Thought I'd ask since a forum Search on them didn't bring anything up!

I'm still an absolute newbie, so all opinions are welcome!

https://www.moneyfarm.com/uk/ [nofollow]

Will they prepare and file Form 3520-A for the trust each year?

Will they prepare and file Form 3520-A for the trust each year?

Hey Guys! I'm so sorry, but I've only just this week started researching retirement options and I've never heard of that form. What are the implications? Do I want them to prepare and file it for me? Is the form required for PFICs? Thanks for your insight!

Hey Guys! I'm so sorry, but I've only just this week started researching retirement options and I've never heard of that form. What are the implications? Do I want them to prepare and file it for me? Is the form required for PFICs? Thanks for your insight!

No - it the form prepared annually for a foreign grantor trust. You would separately file a 3520 each year. 

No - it the form prepared annually for a foreign grantor trust. You would separately file a 3520 each year.

Thank you! I've arranged a chat with one of their pension advisers, so will report back with what they tell me.

Thank you! I've arranged a chat with one of their pension advisers, so will report back with what they tell me.

This is really good info for others in this situation, thanks for sharing your experience.

This is really good info for others in this situation, thanks for sharing your experience.

Just got off the phone and unfortunately the "Senior Investment Consultant" I spoke to was very friendly, but not too knowledgeable on UK/US tax implications. He said that they simply send a W9 form (if I remember correctly) to their US citizens at the end of each year. It looks like all their portfolios seem to include some PFIC, but of course I'd love it if someone with more experience could have a look as my knowledge on what falls under a PFIC is still limited.

https://www.moneyfarm.com/uk/portfolios/ [nofollow]

Oh, well!! Back to square one! 

This:

https://thunfinancial.com/home/american-expat-financial-advice-research-articles/american-expat-pfic-uk-non-reporting-fund-investment-trap-article/

Indicates you don't need to do PFIC reporting if held in a SIPP.

This:

https://thunfinancial.com/home/american-expat-financial-advice-research-articles/american-expat-pfic-uk-non-reporting-fund-investment-trap-article/ [nofollow]

Indicates you don't need to do PFIC reporting if held in a SIPP.

That's so interesting. Can anyone else chime in on this, because it would make my life so much easier if that was the case. How would the gains be taxed then? Thanks everyone.

Correct - Treasury Regs do not require PFIC reporting.  You'd still have an FGT - so will need to file 3520-A, 3520, 8938, 8621, Schedule B and an FBAR each year.  How comfortable are you with the US taxation of FGTs? https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-foreign-trusts-final-021315.pdf

Correct - Treasury Regs do not require PFIC reporting.  You'd still have an FGT - so will need to file 3520-A, 3520, 8938, 8621, Schedule B and an FBAR each year.  How comfortable are you with the US taxation of FGTs? https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-foreign-trusts-final-021315.pdf [nofollow]

Thanks Guya, very helpful. I don't think I'm at a point where this is feasible yet. I appreciate your input.

There are different opinions on this (PFIC reporting within SIPPs). Whenever there is a difference of opinion I choose the one that indicates I don't have to pay any tax or preparation fees.

In addition to the link I posted easier, this:

https://help.taxesforexpats.com/article/537-uk-isa-sipp-foreign-trusts-on-us-tax-return

says this:

<<
SIPPs are trusts to the same extent that every retirement account is a trust by nature.

<<SIPP are not foreign trusts - beware of redundant forms

Because of the U.K.-U.S. treaty, SIPPs are considered IRS-qualified pension accounts. Therefore, there is no need to report them as foreign trusts. Income in SIPPs can be deferred just like income in a U.S. IRA accounts.

We are often asked this question (is my SIPP a foreign grantor trust), as other tax preparers (often in the U.K) are notorious for preparation of redundant forms to justify high fees they charge for US tax returns. Ironically, along with forms 3520-a they commonly file form 8833 explaining that US retirement plans are IRS-qualified, although it has been determined that this obvious fact does not need treaty-position disclosure.>>

With regard to 8261, from here:

https://www.pwc.com/gx/en/services/people-organisation/publications/assets/pwc-united-states-pfic-guidance-provides-new-reporting-exceptions.pdf

<<

The temporary PFIC regulations
provided an exception for certain
foreign pension funds. Specifically, no
Form 8621 must be filed for PFIC
interests that are owned through a
foreign trust that is a foreign pension
fund operated principally to provide
pension or retirement benefits where
an income tax treaty essentially
provides that the earnings from the
pension fund are not taxable until
distribution. Effectively, this
exception only applied to those
foreign pension funds treated as
foreign trusts under entity
classification rules for US tax
purposes.
The final regulations expand this
exception to include all applicable
foreign pension funds (or equivalents)
under any type of arrangement
regardless of their classification for
US federal tax purposes. This
exception applies for any beneficiary
of, participant in, a plan, trust,
scheme, or other arrangement that is
treated as a foreign pension fund if an
income tax treaty states that any
income from the fund is only taxed
when it is paid to the shareholder. >>


So the gains grow tax free until withdrawn. At withdrawal time you may or may not have a basis in the pension ( I believe this depends on whether you funded it personally, or your employer funded it). If you have a basis you would be taxed only on the profit. Take those payments periodically and allocate the profits (which are taxable) to the 25% you get tax free.

Income from the SIPP will accrue WEP on your US social security - unless you liquidate the SIPP before taking US SS (which I plan to do).

A

There are different opinions on this (PFIC reporting within SIPPs). Whenever there is a difference of opinion I choose the one that indicates I don't have to pay any tax or preparation fees.

In addition to the link I posted easier, this:

https://help.taxesforexpats.com/article/537-uk-isa-sipp-foreign-trusts-on-us-tax-return [nofollow]

says this:

<<
SIPPs are trusts to the same extent that every retirement account is a trust by nature.

<<SIPP are not foreign trusts - beware of redundant forms

Because of the U.K.-U.S. treaty, SIPPs are considered IRS-qualified pension accounts. Therefore, there is no need to report them as foreign trusts. Income in SIPPs can be deferred just like income in a U.S. IRA accounts.

We are often asked this question (is my SIPP a foreign grantor trust), as other tax preparers (often in the U.K) are notorious for preparation of redundant forms to justify high fees they charge for US tax returns. Ironically, along with forms 3520-a they commonly file form 8833 explaining that US retirement plans are IRS-qualified, although it has been determined that this obvious fact does not need treaty-position disclosure.>>

So the gains grow tax free until withdrawn. At withdrawal time you may or may not have a basis in the pension ( I believe this depends on whether you funded it personally, or your employer funded it). If you have a basis you would be taxed only on the profit. Take those payments periodically and allocate the profits (which are taxable) to the 25% you get tax free.

Income from the SIPP will accrue WEP on your US social security - unless you liquidate the SIPP before taking US SS (which I plan to do).

A

This is great information, thank you Art. I'm in the odd predicament where because of my age (24) I don't yet have that much to invest, and I'm afraid that if I do open an SIPP the cost of the additional tax forms I'd need to have prepared would wipe out any gains. What do you think?

They don't make it easy for us, do they! Haha.

Art is recommending you take an aggressive position on every US tax return you file for the next 40 to 60 years; arguing that a SIPP is not a trust. There is no substantial authority for the position. The safest thing to do is get your own legal opinion - the next safest is to ask the SIPP trustee for a copy of their legal advisers opinion; which they will have to protect themselves if they are willing to take on US persons.

I'm not recommending anything. I'm passing on references I have seen which indicate you not need all this filing for SIPPS. 3 references from professionals who have advised 1000s of clients.

I, personally, have paid a US tax attorney to get his legal opinion and he agrees there's no need for PFIC reporting or trust reporting for a SIPP. And he will stand by this if ever I am questioned. However, I've been doing this for over 10 years and not had a problem.

Let's turn this around  - does anyone have any evidence of anyone with a SIPP ever being penalized for not filing these forms?

A