Investing for US/UK dual citizens living in the UK.

My money is in the US wrapped in retirement accounts and also invested in US and UK reporting ETFs which will be tax efficient in both the US and UK. However, if I move to the UK I won't be allowed to invest any more money in those accounts. So is there a solution that avoids the PFIC complications ie a UK general investing account where I can buy funds that get around UK and US tax issues or do I just have to buy individual stocks? I also read that Schwab might be allowed to sell US ETFs to UK investors if they can agree something with UK regulators.

Are you sure you can’t continue to invest in the US funds you have?  Every year I sell and buy funds to maintain my target asset allocation.  I have been retired for 14 years now so am in drawdown mode but I don’t see that I can’t buy more shares in the funds I own.

Are you sure you can’t continue to invest in the US funds you have?  Every year I sell and buy funds to maintain my target asset allocation.  I have been retired for 14 years now so am in drawdown mode but I don’t see that I can’t buy more shares in the funds I own.

I was told that I couldn't make new contributions to ETFs or funds in retirement or general accounts. You might be able to trade within retirement accounts because they are trusts, but they said all I could do in the general account was reinvest dividends and capital gains and sell for withdrawals.

I was told that I couldn't make new contributions to ETFs or funds in retirement or general accounts. You might be able to trade within retirement accounts because they are trusts, but they said all I could do in the general account was reinvest dividends and capital gains and sell for withdrawals.

Interesting, I’ll maybe have to check that out even though the only savings we do these days is in savings accounts and bonds in the UK. Did your brokerage tell you this?

Actually, I know this is probably not the case. Last year our daughter, who lives in the same town as us in England, received a 6 figure legal settlement via a physical paper check and was able to do a mobile check deposit directly into her Vanguard account. They accept mobile deposit checks up to $500k. She then invested it into her existing Vanguard funds. Vanguard does have address on record as here in England as of 2022.  Before telling her about this I tried it myself, writing a USD check to myself and doing a remote deposit.

Interesting, I’ll maybe have to check that out even though the only savings we do these days is in savings accounts and bonds in the UK. Did your brokerage tell you this?

Actually, I know this is probably not the case. Last year our daughter, who lives in the same town as us in England, received a 6 figure legal settlement via a physical paper check and was able to do a mobile check deposit directly into her Vanguard account. They accept mobile deposit checks up to $500k. She then invested it into her existing Vanguard funds. Vanguard does have address on record as here in England as of 2022.  Before telling her about this I tried it myself, writing a USD check to myself and doing a remote deposit.

That's interesting and what I was hoping I could do, although the deposits would come from a US bank account. I talked to a rep and that's sometimes not the best way to get an answer if the question is out of the ordinary. I'll ask Vanguard in writing if I can buy things like VTI in my existing general account when I move to the UK and do IRA to ROTH conversions. Also dod you have a ROTH and if so do you know if Vanguard withhold any taxes on withdrawls...I've heard that they do which is outrageous if true and will probably make be go to Schwab before moving to UK.

That's interesting and what I was hoping I could do, although the deposits would come from a US bank account. I talked to a rep and that's sometimes not the best way to get an answer if the question is out of the ordinary. I'll ask Vanguard in writing if I can buy things like VTI in my existing general account when I move to the UK and do IRA to ROTH conversions.

One thing I did get caught out with was not having a US correspondence address. Vanguard allow a street address which is where you reside and a separate correspondence address. Once our daughter moved over I stopped using her address as my correspondence address and the first time I made a withdrawal from my Roth IRA I had a mandatory 30% withholding made by Vanguard. I challenged it but they said it was an IRS rule for overseas residents regardless of the type of IRA they have. Makes sense given that there are circumstances where Roth distributions are not tax free. I got the withholding back when I filed my IRS return but I then added the forwarding US mail service address my daughter uses as my correspondence address and the following year there was no withholding required for my Roth distribution.

Both my wife and I have made IRA to Roth conversions at Vanguard while living in the UK, so you shouldn’t have a problem there.

I am with Schwab and they informed me that as a UK resident I could not buy ETFs or mutual funds any longer - just stocks and individual bonds.  In the end I elected to have a US based company manage my account (for a fee of course).  They can then buy ETFs on my behalf.

This article is a good read and explains some of the difficulties in buying and selling mutual funds from overseas, but it does say that ETFs are a good work around since they are traded directly by the investor like stocks. (Mutual fund trades are done by the brokerages on behalf of the investor). Before moving back I converted  my mutual funds to their ETF equivalents and also checked that the ETFs I own are HMRC Reporting.

https://www.americansabroad.org/mutual_fund_restrictions#:~:text=Because%20foreign%20jurisdictions%20are%20unable,back%20in%20the%20United%20States.

Earlier this year Charles Schwab and Company, Fidelity Investment and T.Rowe Price announced that they would no longer allow Americans living overseas, even their own employees, to buy US based mutual funds. There are limited exceptions for 401k plans, but for all other accounts including IRAs and Brokerage accounts, whether self managed, with the company as the advisor or with an independent investment advisor, mutual fund purchases (including dividend re-investments) have come to a halt. The company's are not forcing clients to sell the mutual funds (forcing a capital gain or loss) and are not for the most part forcing accounts to be closed, but they are limiting new purchases.
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Luckily, with respect to the mutual fund issue, a reasonable work around that is generally legal from most countries is to buy ETFs (which trade like stocks; between individual investors) rather than mutual funds where subscriptions and redemptions generally happens between the investor and the investment/fund manager. In the case of Vanguard, many of their ETFs are in fact shares of their mutual funds, a process they have patented. ETFs can have other advantages over mutual funds too such as lower costs, redemption and purchases throughout the trading day and generally a lot fewer capital gains distributions.

I am with Schwab and they informed me that as a UK resident I could not buy ETFs or mutual funds any longer - just stocks and individual bonds.  In the end I elected to have a US based company manage my account (for a fee of course).  They can then buy ETFs on my behalf.

Care to share the name of that company?

This article is a good read and explains some of the difficulties in buying and selling mutual funds from overseas, but it does say that ETFs are a good work around since they are traded directly by the investor like stocks. (Mutual fund trades are done by the brokerages on behalf of the investor). Before moving back I converted  my mutual funds to their ETF equivalents and also checked that the ETFs I own are HMRC Reporting.

https://www.americansabroad.org/mutual_fund_restrictions#:~:text=Because%20foreign%20jurisdictions%20are%20unable,back%20in%20the%20United%20States.

That's from 2015 and I think PRIIPs has now made it illegal to buy US ETFs in the UK and EU. Schwab is in talks with the UK to offer US ETFs in the UK again.

One thing I did get caught out with was not having a US correspondence address. Vanguard allow a street address which is where you reside and a separate correspondence address. Once our daughter moved over I stopped using her address as my correspondence address and the first time I made a withdrawal from my Roth IRA I had a mandatory 30% withholding made by Vanguard. I challenged it but they said it was an IRS rule for overseas residents regardless of the type of IRA they have. Makes sense given that there are circumstances where Roth distributions are not tax free. I got the withholding back when I filed my IRS return but I then added the forwarding US mail service address my daughter uses as my correspondence address and the following year there was no withholding required for my Roth distribution.

Both my wife and I have made IRA to Roth conversions at Vanguard while living in the UK, so you shouldn’t have a problem there.

Would filing a W-8BEN or a W9, if you are a US citizen, help to eliminate the 30% withholding from the ROTH?

Would filing a W-8BEN or a W9, if you are a US citizen, help to eliminate the 30% withholding from the ROTH?

No, I don’t think so. A W-8BEN is not applicable to a USC I believe (non-resident aliens). When I talked with Vanguard they pointed me at the IRS rule that states that IRA distributions to overseas customers must have a 30% withholding so a W9 would not help either.

Having a US correspondence address has fixed the problem for me so far.

No, I don’t think so. A W-8BEN is not applicable to a USC I believe (non-resident aliens). When I talked with Vanguard they pointed me at the IRS rule that states that IRA distributions to overseas customers must have a 30% withholding so a W9 would not help either.

Having a US correspondence address has fixed the problem for me so far.

I'd love them to point to the bit in the IRS code about 30% blanket withholding and ignoring the documentation that the payment is tax free under a treaty or being made to a US person. This withholding seems like a reason to investigate other brokers for my ROTH.

I am with Schwab and they informed me that as a UK resident I could not buy ETFs or mutual funds any longer - just stocks and individual bonds.  In the end I elected to have a US based company manage my account (for a fee of course).  They can then buy ETFs on my behalf.

Two other options come to my mind for a US citizen living in the UK. They could just buy shares in individual companies with a UK broker or buy UK EFTs or mutual funds and deal with the PFIC implications. If they do this inside an ISA there will be no UK tax and then they can do a QEF declaration and just pay the tax each year to the IRS.

I'd love them to point to the bit in the IRS code about 30% blanket withholding and ignoring the documentation that the payment is tax free under a treaty or being made to a US person. This withholding seems like a reason to investigate other brokers for my ROTH.

I apologise, it looks like you are correct, I just believed the Vanguard agent I talked to instead of being more persistent. You should be able to file a W9 with them if you are a USC living overseas and don't have a US address on file with them.

https://personal1.vanguard.com/pdf/s273.pdf?2210114361#:~:text=The%20IRS%20requires%20us%20to%20withhold%2030%25%20of%20your%20withdrawals,completed%20IRS%20Form%20W%2D8BEN.