FULL ISA GUIDE (UK) – Save without paying tax is similar to Canada’s Registered Tax Free Savings Account (TFSA). Neither come with a warning sticker for investors who may be (or may not be) *US Persons* as to whom and how the US considers the ISA and the TFSA *foreign trusts*.
Now, even with the UK IGA exempting the ISA, some investment brokers are refusing to open accounts for British savers who have US citizenship, as a result of draconian laws introduced by US tax authorities.
The legislation, called Foreign Account Tax Compliant Act (or “Fatca”), requires banks, brokers and other finance firms to report the names and financial details of US customers to America’s Internal Revenue Service.
This is costly and some organisations, including National Savings & Investments, have decided not to comply. Instead they have closed the accounts of US nationals, or refused applications for new accounts.
It has emerged that a number of DIY brokers have decided to take similar action, updating their terms and conditions to bar US citizens even if they are British residents and taxpayers.
…“We had not previously requested details regarding client nationalities as prior to last year there was no requirement to do so. When we become aware that a client has US links we explain any decision regarding the closure of the account to the client and what their options are.”
Other brokers to halt the opening of new accounts for US citizens include Interactive Investor, the Share Centre and Alliance Trust Savings.
The Share Centre’s current terms and conditions state: “In the future, should you become an American citizen, you agree to inform us immediately and consent to the automatic closure of your account.”
Which other countries will follow suit / copy cat to protect themselves, even for such accounts *IGA exempted from FATCA reporting*?