Vanguard is the place for US expats.

After US Fidelity recently closed the mutual fund  (but not brokerage) accounts of customers with non-US addresses I wrote to Vanguard to re-check their policy. Happily they are still welcoming to existing customers who move to the UK. Of course the big bonus with Vanguard is that many of their ETFs are HMRC reporting funds allowing US citizens resident in the UK to get out of the PFIC/reporting fund "Catch-22" situation mentioned in Vanguard's reply.

Thank you for taking the time to contact us.

The "Catch-22," for U.S. ex pats is interesting to learn about. I can
assure you that when you become a resident of the U.K., you will be able to
access and manage your Vanguard account just as you can now.

However, it is my error regarding the W8-BEN. Here is what I should have
stated.

If you're a U.S. citizen and your payment is mailed outside the United
States, you must certify your U.S. tax status by completing a W-9. Even
though we already have your certified tax status and SSN, we would need
completion of a new W-9.

Vanguard is required by the IRS to deduct 10% federal withholding on all
IRA distributions delivered outside the United States to U.S. citizens.
We'll withhold the required 10% on all distributions after we receive your
valid W-9.

Again, we would not need the W-9 until after you changed your address.

If you have additional questions, please call Vanguard Voyager Services(R)
at 800-284-7245. You can reach us on business days from 8 a.m. to 10 p.m.
and on Saturdays from 9 a.m. to 4 p.m., Eastern time.

Have you asked Vanguard what they will be reporting under FATCA? Presumably once someone is UK resident they will be disclosing this to the IRS so that the IRS can inform HMRC?

Have you asked Vanguard what they will be reporting under FATCA? Presumably once someone is UK resident they will be disclosing this to the IRS so that the IRS can inform HMRC?

Nope, I though I'd leave that up to them. I think most of the non-US address worries for US institutions come out of the Patriot act and I'm not sure of the reciprocal aspects of FATCA as they relate to US institutions informing HMRC of UK indicators. Maybe theOAP wants to comment.

Of course none of my Vanguard accounts will appear on my 8938 and when I move to the UK I will be resourcing, using FTCs and paying the appropriate amounts to HMRC and the IRS.

Thanks for making this inquiry at Vanguard and letting us know their response.  Very informative.

I still wonder if there will be confusion in this reporting process (other than mine). I WAS going to sell off my Vanguard Total stock and then move my Dividend fund over to the ETF version (of Total Stock or Dividend)....not sure now with stocks going down. I have no IRA with Vanguard though.......

I think most of the non-US address worries for US institutions come out of the Patriot act and I'm not sure of the reciprocal aspects of FATCA as they relate to US institutions informing HMRC of UK indicators. Maybe theOAP wants to comment.

Reciprocity? I'm looking for that emoticom "rolling about with laughter".

I believe the US Treasury/Congressional definition of reciprocal is "You give, we take. End of story."

OECD AEoI has 60+ signatories agreeing to worldwide reciprocity, including all the major world economies. Well, all except one, who refuses to sign.

Delaware, Nevada, South Dakota,.....there will be only one major tax haven left standing.   

I still wonder if there will be confusion in this reporting process (other than mine). I WAS going to sell off my Vanguard Total stock and then move my Dividend fund over to the ETF version (of Total Stock or Dividend)....not sure now with stocks going down. I have no IRA with Vanguard though.......

Actually the market being down might be a good time to move funds into their equivalent ETF's.  I am moving funds from a VG balanced mutual fund to ETF's and I have to realize cap gains while doing so which is why I have been doing it over a number of years.  With the fund value (NAV) down then I can move more of the money for the same cap gains hit.  I moved some this week, and if the markets continue to fall then I'll move more this year.  

If there is an exact equivalent ETF then you don't realize a cap gain.  For example I had a big chunk of money invested in the VG Total Stock Index fund with a sizable unrealized cap gain but was able to move it all at once into the VG Total Stock Index ETF with no tax hit at all. (the unrealized gain is still present, but now it's in the ETF).

By March 2016 I should have no mutual funds left, just ETF's (listed in the HMRC Reporting Fund list), and we'll be moving to the UK later that year, in time for the 2016-17 UK tax year.

Well......maybe I should just go ahead and move it over then. I was hoping to just clear out our Total Stock fund, but I don't want to right now with it falling like a rock......and we really don't NEED the money for probably a year or whenever we get around to buying something in the UK. Just a matter of what I do with the Dividend Growth fund. I think they have a similar fund.....but I might just stick it in a Total Stock ETF. The ROTH has about $65k in Moderate Growth.....but nobody seems to care about whether that is an ETF or regular fund. Keep hearing rumors on TV about the Govt possibly wanting to weaken the Dollar at some point.........just hoping that is at least 3 months from now.

Well......maybe I should just go ahead and move it over then. I was hoping to just clear out our Total Stock fund, but I don't want to right now with it falling like a rock......and we really don't NEED the money for probably a year or whenever we get around to buying something in the UK. Just a matter of what I do with the Dividend Growth fund. I think they have a similar fund.....but I might just stick it in a Total Stock ETF. The ROTH has about $65k in Moderate Growth.....but nobody seems to care about whether that is an ETF or regular fund. Keep hearing rumors on TV about the Govt possibly wanting to weaken the Dollar at some point.........just hoping that is at least 3 months from now.

If your money is in a US retirement account eg 401k, 403b, 401a, IRA, ROTH (uncertain about 457) the wrapper and the treaty protects your investments from HMRC taxation until you make withdrawals when you have to pay income tax on all of them apart from the ROTH. So you can have HMRC non-reporting funds in them with no nasty UK tax consequences. The only have to avoid UK non-reporting funds issues in regular investment accounts.

If you are converting Vanguard mutual fund shares to the equivalent ETF shares it doesn't matter when you do it....you aren't actually selling anything so there are no tax consequences. A good thing too as you want to avoid wash sale issues. Of course you still have unrealized capital gains and when you move to the UK they might well become subject to UK tax.....hello 1116.....but the current UK CGT allowance is around $16k which gives you some head room. If you want to crystalize you capital gains while still in the US you'd have to sell the mutual funds and then buy the ETFs being careful to avoid a wash sale.

If your money is in a US retirement account eg 401k, 403b, 401a, IRA, ROTH (uncertain about 457) the wrapper and the treaty protects your investments from HMRC taxation until you make withdrawals when you have to pay income tax on all of them apart from the ROTH. So you can have HMRC non-reporting funds in them with no nasty UK tax consequences. The only have to avoid UK non-reporting funds issues in regular investment accounts.

If you are converting Vanguard mutual fund shares to the equivalent ETF shares it doesn't matter when you do it....you aren't actually selling anything so there are no tax consequences. A good thing too as you want to avoid wash sale issues. Of course you still have unrealized capital gains and when you move to the UK they might well become subject to UK tax.....hello 1116.....but the current UK CGT allowance is around $16k which gives you some head room. If you want to crystalize you capital gains while still in the US you'd have to sell the mutual funds and then buy the ETFs being careful to avoid a wash sale.

If you sell

Yeah....if I sell. Not planning on touching my TSP Govt money for at least a few years.....and maybe if I'm lucky I can slip a couple of ROTH conversions in before that time.....wouldn't bet my luck holds that well though. I'm still 2 years away from 59.5. So over the next few years I only plan to spend Vanguard money (None of it is IRA etc). At this time I have around $110K in Total stock, $75K in Dividend Growth and $65K in the ROTH/Moderate Growth. IFFFFFFFFF things will just go our way the plan was to .....
1. Sell the house in 2 months and clear at least $200K after fees. We will lose about $40K on the house after fixing it. But.....we'll have approx 131K Pounds
2. The cash we have sitting in cash for VISA etc. Should be at least $120K when we go. 79k Pounds.
3. 40K Pounds already sitting in my wife's account.
Total should be around 250K without selling any Vanguard. Ifffff we rent for 6 months to a year before buying I have time to sell Vanguard later.....but I would rather do it in the next month or two. Selling off $100K more will allow us to buy a house at any time without having to worry about conversion rates etc. Our limit is probably 235K Pounds max on the house, preferably a little lower....or even a lot lower if there is something we can fix up in a decent area that has lots of good walking.....hence, South South-West of Huddersfield. Wife wants to stay within driving distance to Harrogate....where it's too expensive to buy. 

I won't have to worry about a wash sale.....the market would really have to get hammered before I would lose on what I put in to Vanguard. My hope right now was to get rid of the Total Stock. Then either flip the Dividend Growth money over to the ETF version if it.....or Total Stock ETF (if I can do that...guess I would have to sell Div Growth fund and buy Total ETF which might be an issue).

With our luck.....the Dollar will start falling apart over the next couple of months....... 

Good point nun about wash sales, and interesting discussion about investments in general.

The conventional advice given by US based financial planners is to sell your highest cost basis shares first so that you can harvest a tax loss. I find that advice isn't suitable for most expats, who normally have very little US-taxable income to be offset by the loss. Instead I sell the shares whose cost basis is as close to the current market price as possible, so that I realize as small a gain as possible. I'm saving my higher cost basis shares to be sold if/when I ever move back to the US.

Good point nun about wash sales, and interesting discussion about investments in general.

The conventional advice given by US based financial planners is to sell your highest cost basis shares first so that you can harvest a tax loss. I find that advice isn't suitable for most expats, who normally have very little US-taxable income to be offset by the loss. Instead I sell the shares whose cost basis is as close to the current market price as possible, so that I realize as small a gain as possible. I'm saving my higher cost basis shares to be sold if/when I ever move back to the US.

+1

I got burned by wash sale rules years ago when I sold some shares at a loss from a fund and forgot that I had it set to re-invest dividends and cap gains.  I had made the sale within 30 days of the quarterly distribution - dumb!!

Since then I have always had divs directed to a MM "sweep" fund, and all new funds I've opened since then I use the sell by lot method rather than average cost.

If you are retired and have planned your income sources it's possible to generate a lot of tax free income. The unfortunate thing if you are a US citizen resident in the UK is that you only get to use the lower tax free allowances or tax bands......and those tend to be in the US.

In the UK the first £10k of income is tax free, there is no tax on the first £11k of capital gains and the effective tax rate on dividends is 0% if you are a basic rate tax payer. You can also take a 25% tax free lump sum from a pension plan and the ISA offers tax free growth and income.

Being a US citizen gains in an ISA are taxed and the tax free nature of the 25% lump sum is debated, but as you can now take it as a series of payments over a number of years it looks less and less like a lump sum (which is never defined in the treaty anyway) and more like tax free periodic payments. In the US the personal exemption and standard deduction makes the first $10400 tax free, although circumstances and itemized deductions could push that up and you pay no tax on capital gains or dividends if you stay within the 15% tax bracket. You also have the ROTH which is tax free in the US and the UK.

So if you can just take $10400 in income and then get the rest of your money from capital gains, dividends and ROTH withdrawals you won't pay any tax in the US or the UK. That might not sound like much income, and if you start SS or UK state pension 0% taxable income threshold will probably be breached, but you can live well on not much money if you've managed to pay off things like mortgages and other debt. The other sink for money is a car, so if you stop commuting that saves a ton of money too.

The other sink for money is a car, so if you stop commuting that saves a ton of money too.

I don't think I want to take golf clubs and trolley on a bus.. .... and that's if the bus goes anywhere near the golf course. We don't drive much anyway.....and only plan to buy a fairly cheap car when we get there.....although I used to have a Jazz I quite liked. The price of gas here has dropped more than half of what it was...$1.83 yesterday at my local.

I don't think I want to take golf clubs and trolley on a bus.. .... and that's if the bus goes anywhere near the golf course. We don't drive much anyway.....and only plan to buy a fairly cheap car when we get there.....although I used to have a Jazz I quite liked. The price of gas here has dropped more than half of what it was...$1.83 yesterday at my local.

Do what Seve did, just use a 3 iron.......seriously 3 wood, 5 iron, wedge and putter and a bus card and you are all set.

Simplifying things often makes them more enjoyable. When I worked I drove 17k miles a year (mostly commute) and in my first year of retirement I'm yet to hit 500 miles because I ride my bike most places. I was shocked to do my last fill up when gas was only $2.80 a gallon