A portfolio both tax systems can live with.
UK funds are PFICs to the IRS. US funds without UK reporting status turn gains into income for HMRC. The overlap of investments that work cleanly in both systems is small — and knowing it is the difference between compounding and leaking.
Both systems punish the other's funds
The PFIC regime taxes UK fund gains at top rates with an interest charge; the UK's non-reporting fund rules tax US ETF gains as income instead of capital. A portfolio built innocently on either side can be quietly bleeding several percent a year to avoidable tax treatment.
We audit what you hold, quantify the damage, and map the clean-up — including HMRC-reporting US ETFs that both systems treat rationally.
- PFIC audit of existing holdings, Form 8621 where needed
- UK reporting-fund status checks on US holdings
- Restructuring plans that manage the exit cost
- Dividend withholding and W-8/W-9 positioning
Wrappers don't cross the border
ISAs are taxable to the IRS; Roth IRAs need a treaty claim in the UK; SIPPs are protected but their contents can still raise questions. Which wrapper to fund — and which to stop funding — depends on which side of the Atlantic your future sits on.
What we typically handle for you
- PFIC audit of existing holdings
- Form 8621 preparation per fund
- UK reporting-fund status checks on US ETFs
- Purge-and-rebuild modelling with exit costs
- Compliant portfolio design for both systems
- Dividend withholding and W-8/W-9 positioning
- Wrapper strategy: ISA vs GIA vs pension
- Capital gains reporting on both returns
The services that usually apply
Questions we get about this
A UK designation that lets gains on an offshore fund be taxed as capital rather than income for UK investors.
Buying a non-reporting fund without noticing is a common and entirely avoidable way to convert a capital gain into income.
Direct holdings avoid the PFIC regime entirely, which removes the worst of the US problem.
The trade-off is diversification, so it is a portfolio design question rather than purely a tax one.
Both may tax them, with the treaty allocating and credits relieving the overlap, and rates depending on the source and your residence.
Withholding at source can also apply, and reclaiming over-withheld tax is a separate exercise.
If you are a US person, most likely. Unit trusts, OEICs and investment trusts are typically PFICs, with punitive default treatment and per-fund annual reporting.
The size of the holding does not reduce the reporting burden, only the tax at stake.
The mirror problem exists. Offshore funds without UK reporting fund status can have gains taxed as income rather than at capital gains rates.
Checking reporting fund status before buying is far cheaper than discovering it at disposal.
It is usually a question of choosing wrappers and funds that are recognised by both, rather than optimising for one and accepting the other.
Direct holdings and appropriately domiciled funds frequently avoid the worst of both regimes.
Related pages
- Who we help
Americans in the UK
US expat tax in the UK: annual IRS filing, HMRC Self Assessment, FBAR, ISAs and pensions, handled as one position rather than two returns that never meet.
- Service
PFIC reporting
PFIC analysis and Form 8621 preparation for UK funds, ISAs and platform holdings: the election decided per fund, and the reporting cost cut where it can be.
- Pillar guide
Tax specialists for US and UK
What US and UK tax specialists handle that a general accountant does not: residence tests, treaty relief, FBAR, PFICs, pensions, property and catch-up filings.
- Pillar guide
Accountants for US and UK
How to choose accountants for US and UK tax: what each credential permits, how to verify it, what drives the fee, and when you do not need a specialist.
- Service
Pensions & retirement
Cross-border pension advice: UK pensions under US rules, 401(k)s and IRAs under UK rules, lump sums and treaty positions.
- Who we help
Brits in the US
UK citizens in the US: residency tests, UK property and pensions held from abroad, and the reporting that US residence triggers on everything left behind.
Further reading
- Building a financial plan when two tax systems both claim you
Most cross-border mistakes are not technical. They happen because two competent advisers each optimise half a position, and nobody owns the join between them.
- Separating across two tax systems, and the rules that differ
Splitting assets is usually tax-free between spouses. That protection has an expiry date in Britain, and a hole in America when one of you is not American.
- Paying school fees across an ocean, and who gets taxed on it
Grandparents helping with fees is generous and ordinary. Doing it across a border turns it into a gift question, a reporting question, and occasionally a tax bill.
Last reviewed . Thresholds and rates change annually — check figures against the current tax year before relying on them.
Holding funds on the wrong side of a border?
We will tell you what your portfolio actually costs you in reporting, and what a cleaner one looks like.