Current UK Resident / US Citizen - Tax + Investment Advice Requested

Hello,

I'm admittedly very far behind on this and given the impending tax days in the US and UK, I'm hoping to get some advice.

Personal/Professional Details

• 31 years old
• US-born citizen living in UK
• Tier 2 - General visa
• Previously lived in the Greater Boston, MA area from May 2010 to August 2017.
• Full-time employee while also a sole proprietor of an online business
• Moved with same company from US to UK in September 2017
• No specified term; goal would be to achieve ILR and eventually dual UK+US citizenship
• Sole proprietor of an online business which generates revenues via advertising(no physical products/location); profit ranges between $30-60k USD per annum paid into US bank account.

Personal Finance Details

US Investments

• Personal/Taxable Investment - managed via Wealthfront
• Roth IRA - TD Ameritrade
• Rollover IRA - TD Ameritrade
• SEP IRA - TD Ameritrade

UK Investments/Pensions

• Employer Pension (employer contributing 6%/personally contributing 3%)

Other things to note:

• Using my parents/childhood home address located in Chicago, IL for US-based bank accounts, credit cards, and investment accounts and to receive 1099-MISC tax forms from online business partners

I hope the above gives a fairly comprehensive picture of my personal finance / tax filing situation. While my goal is to stay at least 6 years (2023+) in order to earn dual citizenship, there is a chance that I will leave the country before then. Currently, I am not personally contributing to any retirement plan other than the minimum required for my employers UK pension which bothers me considering I used to max out my 401k + roth IRA in the States.

I know I am missing out on UK tax benefits by not contributing more, but I'd like to understand the tax implications of said investments if I were to move back to the USA in the short (< 5 year time frame).

Investment questions

• With less than 10 days left to contribute to a 2018 tax year ISA, I'd like to set up a Vanguard S&S ISA with the max deposit. Which investment companies are accepting US citizens these days? What funds would be suggested for a simple, bogleheads friendly investment strategy given PFIC/FATCA rules?
• What opportunities do I have to invest in US-based retirement plans given my self-employment income while living in the UK, e.g. Roth/Traditional IRAs?
• If I were to contribute more to personal taxable investment accounts, should I do so in the US or open a new account in the UK?
• I've checked my Wealthfront account where I keep my US personal/taxable investments. All of the ETFs, with the exception of Wealthfronts 'WF 100' fund that is used for stock level tax loss harvesting (more on that here: https://research.wealthfront.com/whitepapers/stock-level-tax-loss-harvesting/ [nofollow] ) and Vanguard's S&P National AMT-Free Muni ETF are tracked on the HMRC excel spreadsheet. I'm worried that I'll need to consider no longer utilizing a robo firm if I can't control the ETFs that are purchased. The tax loss harvesting aspect has been very beneficial during volatile markets.

Tax Questions

• Has anyone found a financial planning firm that also handles tax preparation? I recognize that these two services are different disciplines, but I feel as though a single firm would be best suited for a comprehensive financial strategy. I'd happily be convinced otherwise with recommendations / referrals.
• What opportunities do I have to reduce my tax liability for my sole proprietorship business?
• Given my sole proprietorship internet based business has no physical location, is there a business formation/structure and/or location that would further reduce my tax liability?

Thank you all for your time! Going to get back to reading the wealth of threads already here!

Hi! Can you clarify your visa status please?

Hi! Can you clarify your visa status please?

Tier 2 - General. Sorry, I thought I had put that in there.

Tier 2 - General. Sorry, I thought I had put that in there.

Thanks.

As far as I am aware, self employment is not permitted on a Tier 2 general visa.

Thanks.

As far as I am aware, self employment is not permitted on a Tier 2 general visa.

I also have a full-time job with a Tier 2 General employer sponsoring me.

I also have a full-time job with a Tier 2 General employer sponsoring me.

Understood but there are restrictions as to additional employment/self employment.

Understood but there are restrictions as to additional employment/self employment.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/261470/guidance-t251.pdf [nofollow]

On page 99, it states that:

SUPPLEMENTARY EMPLOYMENT
576. Migrant’s sponsored under Tier 2 and Tier 5 are allowed to undertake other work which
is supplementary to that for which their CoS was assigned. The only exception to this for
private servants sponsored under Tier 5 (International Agreement) who are not allowed to take
supplementary employment.
577. This supplementary employment does not have to meet the resident labour market test
requirements and the employer does not have to be a licensed sponsor. Supplementary
employment must:
a) be in the same profession and at the same professional level as the work for which the
migrant’s CoS was assigned; or
b) be a job which is on the list of shortage occupations published on our website
at http://www.ukba.homeoffice.gov.uk/sitecontent/documents/workingintheuk/ [nofollow]
shortageoccupationlistnov11.pdf (if the occupation concerned is removed from the list of
shortage occupations, the migrant must cease that employment); and
 Tier 2 & 5 of the Points-Based System – Guidance for Sponsors - Version 10/13 Page 95 of 125
c) be no more than 20 hours a week; and
d) be outside of normal working hours for which the migrant’s CoS was assigned.
578. Migrants do not need to advise us of any supplementary employment they undertake, as
long as it meets the above stated criteria.
579. A migrant should advise their new employer that the employment is supplementary
employment so that they can make the necessary checks in accordance with the
recommendations we make in our guidance for employers on illegal working. That guidance
is available on our website at http://www.ukba.homeoffice.gov.uk/sitecontent/documents/ [nofollow]
employersandsponsors/preventingillegalworking

So I believe I'm good there as my supplemental employment is in the same field as my T2 sponsored profession.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/261470/guidance-t251.pdf

On page 99, it states that:

So I believe I'm good there as my supplemental employment is in the same field as my T2 sponsored profession.

That is referring to employment though and you have told us that you are self employed.

It might be a good idea to post in the visa forum for confirmation. https://talk.uk-yankee.com/index.php?board=17.0

The profit from self-employment is all UK taxable whether or not lawful.  The good news is that this will save paying US self-employment tax.

As regards questions on UK investments.

I would avoid doing more than match the employer  contributions to the pension plan otherwise it becomes a Foreign Grantor Trust in the eyes of the IRS.

I would also avoid stocks and shares ISAs as they will be PFICs to the IRS. Even with cash ISA’s the interest is taxable by the IRS.

As regards questions on UK investments.

I would avoid doing more than match the employer  contributions to the pension plan otherwise it becomes a Foreign Grantor Trust in the eyes of the IRS.

I would also avoid stocks and shares ISAs as they will be PFICs to the IRS. Even with cash ISA’s the interest is taxable by the IRS.

Well, there are ways around PFICs, such as buying Vanguard funds that also report to HMRC -- that would avoid PFIC issues. Granted there aren't a large selection, but Vanguard has enough to make a portfolio worthwhile.

Even for Cash ISAs, the government still give a 25% benefit, no? Surely that would be worthwhile to take advantage of, even if you are paying tax on the interest?

Well, there are ways around PFICs, such as buying Vanguard funds that also report to HMRC -- that would avoid PFIC issues. Granted there aren't a large selection, but Vanguard has enough to make a portfolio worthwhile.

Even for Cash ISAs, the government still give a 25% benefit, no? Surely that would be worthwhile to take advantage of, even if you are paying tax on the interest?

Do you know of ISAs that offer US Vanguard funds? Not heard of that but I’m sure folks here would be interested.

We do own Cash ISAs, I was just pointing out that the IRS will tax the interest, so folks should be sure to report it.