“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. I’d 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’re a British Expat living in the U.S. and investing in the UK, the tax efficient investment options are limited. More importantly, avoiding tax inefficient investments, such as Passive Foreign Investment Companies (PFIC’s) can prove difficult. If you want to find out more about what PFIC’s are and the side effects, you can do so here. To summarise, PFIC’s are a poor investment from a tax point of view.  Therefore setting up an investment strategy that avoids these is one thing to consider.

Key Considerations:

Another consideration for British expats investing in the UK, is your investment objectives and how much flexibility is needed. If you know that the money going to be spent in the UK, then converting it to US Dollars at a time when the Pound is at a low level would seem like an odd decision. However, if you’re uncertain regarding future plans and residency, an investment strategy held in US Dollars and Pound Sterling might be an appropriate method to attempt to mitigate currency risk. A British Expat living in the US who held investments in the UK during the financial crises or during the Brexit vote you’ll know first-hand how much exchange rate movements can reduce the value of the investment in your local currency.

The Next Steps:

Keep the filing requirements of your investment simple so that you or your CPA have less work to do. Investment providers in the UK won’t provide a tax pack that is intended for an IRS tax return. Consider that an UK-based investment may be subject to UK  tax reclaims 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. This ultimately saves times and money.

These factors are additional to the normal influences that should be considered when investing. For example 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. Please contact us if you have any questions.