Reporting US Mutual Funds to HMRC

Hi All,

I have read around on UK taxes and am trying to get things sorted for this tax year. I'm completely confused and not sure what I really need to report. I have two mutual fund accounts, one of which is completely empty now as I changed it all over to a different fund this year. Both are with Vanguard. I've looked at the big Excel spreadsheet that HMRC publishes to see if my accounts are 'reporting funds' and I'm honestly not sure. There are funds with similar names but they are listed like 5 or more times with slight differences. Originally I thought I'd hire a professional but the fees are outrageous at £450 or even £150 for a 30-minute consultation (really!). I don't think my taxes will be hard as most of it is done instantly through the PAYE system, so it's just reporting these two little funds, which I've not touched since leaving the US. I'm also not sure if I need to report prior years, in which case it probably WOULD be wise to hire someone regardless of the cost. I moved here in 2017 and only found out in 2019 (after the UK tax year was over, of course) that I might need to file separately as previously I just thought since I didn't do anything with my funds or put any UK money in that they just needed reporting on my US taxes and the rest was sorted with the PAYE system here.

I really want to get all of this right though as I'm getting ever closer to the magic point of being able to apply for ILR and don't want to do something stupid to mess it up. Love my job and living here too much!

I have Vanguard funds in my taxable account and can tell you how to look them up on the HMRC Reporting Funds spreadsheet. Funds inside IRA's and the like won't be taxed until distributions are made, then taxed as regular income.

I converted mine to ETFs from Mutual Funds before moving back.  If your MF is a mix of stocks, bonds and cash then I doubt it will be reporting into HMRC. I believe that if it is not on the list then all dividends and capital gains from sale of shares will be treated as regular income when filing your HMRC taxes.

On Vanguards website look up your fund details and make a note of the CUSIP number. The example below is from the details of "VYM - VANGUARD HIGH DIVIDEND YIELD ETF"

In the HMRC Reporting funds spreadsheet you can then search for the CUSIP number.  In the example below you will find that fund listed on row 76203 as "Vanguard High Dividend Yield Index Fund - ETF Shares "

ETF snapshot
ETF profileAlertselected
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NAV price
NAV price   $83.86
30day SEC yield
as of 07/31/2020   3.61%B
Expense ratio   0.06%
52-week high   $94.80 on 01/17/2020
52-week low   $61.10 on 03/23/2020
CUSIP   921946406

When filing my HMRC return I pay taxes to HMRC and then when filing my IRS return I claim the HMRC tax back as a foreign tax credit using form 1116.

Okay, that's really useful to know how to look up the funds. I definitely don't think one is reporting but the other one *might* be so I want to check.

If it turns out they need(ed) reporting, is it something I can do on my own? I haven't reported for the previous years I've been here so some backtracking work is needed. I'm trying to avoid the expense of hiring a tax specialist as already paying an arm and a leg for driving lessons right now, but want to be all squared away with the government.

Okay, that's really useful to know how to look up the funds. I definitely don't think one is reporting but the other one *might* be so I want to check.

If it turns out they need(ed) reporting, is it something I can do on my own? I haven't reported for the previous years I've been here so some backtracking work is needed. I'm trying to avoid the expense of hiring a tax specialist as already paying an arm and a leg for driving lessons right now, but want to be all squared away with the government.

If you have been receiving income from those funds then they definitely need reporting to HMRC. I don’t know the procedure for reporting income from previous years so I suggest contacting HMRC and asking. Actually, a quick Google gives the answer. You can do a self assessment return up to 4 years after you have income to report.  This is what I would do. Doing a Self Assessment is not too difficult.

https://www.gov.uk/undeclared-income

Declare the income on a tax return
If you’re already registered for Self Assessment but have not declared all your income, you can make a change to your return.

If you do not usually send a tax return, you can register for Self Assessment to declare any income you have not paid tax on from the last 4 years. You’ll need to fill in a separate tax return for each year.

You’ll get a letter telling you what to do next after you’ve registered.

Other useful sites:

https://www.citizensadvice.org.uk/debt-and-money/tax/problems-with-tax/help-with-tax-problems/

https://www.gov.uk/government/organisations/hm-revenue-customs/contact

Okay, thanks again! I will call HMRC tomorrow then and see what they say. I don't know why the very thought of doing UK taxes makes me want to break out in hives, but hopefully it's not as bad as I'm imagining and is an easy fix.

I was going to ask a related question - We have only IRA's, no taxable investments, back in the US and Fidelity won't let us buy new mutual funds. From other posts I take it that we can buy ETF's. Would these also need to appear on HMRC's list?

Thanks

I was going to ask a related question - We have only IRA's, no taxable investments, back in the US and Fidelity won't let us buy new mutual funds. From other posts I take it that we can buy ETF's. Would these also need to appear on HMRC's list?

Thanks

You say that you are back in the US? Are you now tax resident in the US and not tax resident in the UK?

Funds on HMRC’s reporting list only matters if you are tax resident in the UK. From a US perspective all foreign funds are toxic, PFIC’s, because they don’t know what is in them or how they are managed. With HMRC they will recognize foreign funds and treat them the same as domestic funds if they report the workings of the fund into HMRC. It is important that funds pay out all dividends and capital gains in the year that they happen and don’t otherwise carry over or conceal income.

Sorry for the confusion - the funds are in the US, we are in the UK.

@billabong1 To add to the new query, Fidelity might be better than Vanguard (or you may be better prepared than I was) but this will depend on the type of account you have. For example, I did not move to a brokerage account before leaving the US and so Vanguard has informed me that I'm stuck trading with the mutual funds available for the account I currently hold--this DOES NOT include ETFs in my case. In short, it's worth checking directly with Fidelity because once you leave you can't as easily change your account type.

I was going to ask a related question - We have only IRA's, no taxable investments, back in the US and Fidelity won't let us buy new mutual funds. From other posts I take it that we can buy ETF's. Would these also need to appear on HMRC's list?

Thanks

I also found this website https://moneymattersforglobetrotters.com/what-should-i-do-with-my-us-investment-accounts-when-i-move-overseas/ very good reading. I've read Charles Schwab is a good brokerage account for US expats from this and other sources, so may be worth investigating--I've yet to switch but will likely when I get through this year's taxes.

I was going to ask a related question - We have only IRA's, no taxable investments, back in the US and Fidelity won't let us buy new mutual funds. From other posts I take it that we can buy ETF's. Would these also need to appear on HMRC's list?

Thanks

Before we left we had accounts with both Vanguard and Fidelity and I did a bit of research to discover what we could do once we had moved to England. I decided that Vanguard was best for us as overseas customers so moved our Fidelity funds to Vanguard, and then converted the after-tax funds from MFs to ETFs. I had already switched to Vanguard’s brokerage account.

I don’t know that there is anyway with either Vanguard or Fidelity to buy or begin trading ETFs from overseas if don’t already own any.