“I have just inherited some money in the UK and I would like to know what my investment options are?”
“I have just sold my property in the UK and I would like to create an investment plan for the money that works both whilst I live in the US but also if I return to the UK.”
These are two common enquiries that I receive and ones that I regularly help clients with. If you are a British Expat living in the U.S. and investing in the UK, the tax efficient investment options are limited, and a more important point is often avoiding tax inefficient investments, such as Passive Foreign Investment Companies (PFIC’s). If you want to find out more about what PFIC’s are and the nasty side effects, you can do so here. To summarise, PFIC’s are a poor investment from a tax point of view and therefore setting up an investment strategy that avoids these is one thing to consider.
A second consideration for British expats investing in the UK, is what are your investment objectives and how much flexibility is needed. If you know that the money is to eventually be spent in the UK, then converting it to US Dollars at a time when the Pound is at a historically low level would seem like an odd decision to make. However, if you are uncertain of your future plans and where you’ll be living, an investment strategy that is held in both US Dollars and Pound Sterling might be an appropriate method to try and hedge or mitigate currency risk. A British Expat living in the US who held investments in the UK during the financial crises or on the day of the Brexit vote will know first-hand how much exchange rate movements can reduce the value of the investment in your local currency.
Finally, keeping the filing requirements of your investment as simple as possible so that you or your CPA have less work to do. Investment providers in the UK will not provide a tax pack that is intended for an IRS tax return. Add in the fact that an investment in the UK may be subject to tax in the UK that has to be reclaimed and you may be creating unnecessary extra work. Working with an investment company in the right jurisdiction that provides tax packs for IRS filing makes the reporting quicker and easier, saving time and money.
All these factors are in addition to the normal influences that should be considered when investing; such as your risk profile, capacity for loss, time horizon and how this investment relates to your wider financial planning. Cross Border Financial Planning specialises in working with US connected individuals and I would be happy to answer any questions you might have, which you can send to me at firstname.lastname@example.org .
Cross Border Financial Planner