Investing While on Remittance Basis for Future UK Remittance

I've been considering how to invest while on the remittance basis, using a US taxable account -- with a view towards keeping the funds as "clean" as possible for a potential future UK remittance. 

My understanding is that in a simple (i.e., bank) account situation, it is possible to open a US sweep account where interest is swept from the account, such that the account only contains capital.  Assuming the capital is clean (i.e., it was transferred to the US account cleanly, post-UK taxes), that capital is remittable without issue. 

However, I am struggling with how to structure a US taxable investment account in a similar way as I don't see how one can keep (clean) capital and interest separated in the context of making investments in a US brokerage account?  Any gains in the NAV of a fund or increase in share price for instance, would result in capital gains which would not be taxed by the UK -- creating a mixed account situation, which I am trying to avoid.

Curious to hear how others structure US taxable accounts while on the remittance basis?

I am not aware of a US domestic bank that can never credit interest before "sweeping" it across, so a US domestic bank account which credits interest would always be tainted.

I am unclear why an unrealised gain would constitute a mixed fund?

You could easily set up a sweep account for the dividends and capital gains distributions, but any increase in the cost of the shares is baked into the fund. Of course capital gains on the shares would only be realized if you sold them.

I would like to add some comments about ES’s sweep account for interest.

The aim to keep income and capital gains separate from “clean capital”.

The way to do this is to have separate bank accounts. The accounts can be with the same bank or brokerage; this does not matter.

If the interest is paid into an account with clean capital and later removed, then the clean capital has become tainted. The remittance rules have detailed provisions about “mixed funds”.

I would like to add some comments about ES’s sweep account for interest.

The aim to keep income and capital gains separate from “clean capital”.

The way to do this is to have separate bank accounts. The accounts can be with the same bank or brokerage; this does not matter.

If the interest is paid into an account with clean capital and later removed, then the clean capital has become tainted. The remittance rules have detailed provisions about “mixed funds”.

This is correct - technically - except that US domestic onshore banks cannot structure accounts this way. Banks located in the Channel Islands & Isle of Man could do this.

This is correct - technically - except that US domestic onshore banks cannot structure accounts this way. Banks located in the Channel Islands & Isle of Man could do this.

US brokerages can deposit dividends, capital gains, and bond interest payments into a separate sweep account rather than reinvesting them. It's a standard way to take income from your investments.

Sorry for my ignorance, but how does this work in respect of capital gains?  If I start with 1 share x $10 of stock and end up selling 1 share x $15, wouldn't the account have $5 of gain?  I'm just a bit confused how this can be separated?

The gain would not be $5; as you'd have to convert to Sterling at the date of purchase and sale and use UK CGT pooling to figure the cost.  Proceeds of assets sold at a gain in Sterling would normally be deposited in a segregated capital gains or offshore income gains account.

Sorry for my ignorance, but how does this work in respect of capital gains?  If I start with 1 share x $10 of stock and end up selling 1 share x $15, wouldn't the account have $5 of gain?  I'm just a bit confused how this can be separated?

I was thinking of capital gains distributions, so you don't actually sell any shares.


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I agree, capital gains distributions would normally go directly into the income account.