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mauvejames

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I'm looking at moving to the US in the near future, and some of the implications of the tax system are pretty startling.

For example, I have contributed to a small retirement plan which grows tax free here in the UK, and the US/UK tax treaty ensures that it will continue to grow tax-free once I've moved. So far, so good. However, there is a body of professional opinion stating that such plans count as a "foreign grantor trust" under US law, which has specific reporting requirements that the plan itself is required to comply with, and I am penalised if it fails to do so. The penalty scale starts at $10,000 and goes up from there.

Of course, this body of opinion is being pushed by tax advisors who have a vested interest in both making things as complicated as possible, and who are inclined to a conservative view of the law given their responsibilities to their clients. The IRS hasn't clearly stated one way or another whether UK pension plans are subject to this reporting -- but have specifically exempted the Canadian equivalent.

This is just one frustration of several: becoming a US resident will force me to close some of my financial accounts with institutions which want to avoid FATCA hassles, I'll be limited in which investment choices I can make, and when I eventually take my pension benefits the US will claim tax on the tax-free lump the UK provides if I'm still a resident or have taken citizenship.

For those who have emigrated permanently -- or who acquired US citizenship at birth without ever living there -- I can well understand why even those without significant income or assets would want to renounce their citizenship.