Since the passing of the Foreign Account Tax Compliance Act or ‘FATCA’ in 2010 there has been increasing focus by the US Internal Revenue Service on non-compliance with annual filing requirements by US persons resident outside the US. From 2017, there will be automatic exchange of financial information by HMRC to the IRS in respect of US persons resident in the UK.
Relevant US persons (those with a US passport, Green Card or born in the US) are required to submit an annual US tax return wherever they reside, with few exceptions. In addition, US persons resident abroad are required to submit an annual form in respect of foreign financial accounts they own or have control over.
The penalties for non-compliance with the annual filing requirements are potentially very high. Shaw Gibbs, working with a carefully selected IRS registered preparer, is able to assist US persons resident in the UK in becoming compliant with their annual filings and remaining US compliant, without incurring late filing penalties.
We are also able to provide advice on how to avoid some of the frequent pitfalls that result in much higher taxation on some UK investments for US persons. In many cases US taxation exposure can be legitimately reduced to zero with tax liability being only to HMRC in the UK, although the IRS will still expect an annual tax return to prove the US tax position.
An additional requirement introduced in 2018 requires certain US Nationals with major interests in non-US unlisted companies to declare and pay tax on retained earnings that have not yet been distributed to stakeholders. This will require additional reporting for UK resident US persons with a relevant shareholding in UK unlisted companies.
With the automatic exchange of financial information now a reality this is the time for US persons resident in the UK to act before the IRS approaches them directly as a delinquent US taxpayer.
As a part of the DFK International, a worldwide network of independent accounting, tax and business advisory firms, we can also co-ordinate advice with advisers in other countries to provide joined up advice.