Not being big on social media I do however post the occasional ‘tweet’. When I do I very occasionally get a ‘retweet’ or a ‘like’, proving that people do see what I post, although in all honesty these are generally from sympathetic members of my own immediate family! I’m certainly not attracting Mr Trumps’ twitter level of attention for instance! Well last week that changed, well for one ‘tweet’ at least.

Who didn’t notice the announcement of the next big Royal Wedding, of Prince Harry to Meghan Markle. Well in amongst all the subsequent announcements of a wedding venue and a date etc was the mention that Ms Markle intends to renounce her US Citizenship once she is married.

So what’s the link between my unusually popular tweet and the next Royal wedding I hear you ask? Well I tweeted the following:

As a Chartered Financial Advisor to a number of US connected persons living in the UK I am aware of the requirement for American citizens living outside of the US to continue to file US tax returns regardless of whether they retain US based assets or income. Essentially American citizens are required, regardless of their residency, to file annual tax returns declaring their worldwide income and gains, from which the US government may require payment of additional taxes, regardless that tax may have been levied upon such income or assets in the country in which they are domiciled. Something generally referred to as FATCA, the Foreign Account Tax Compliance Act is a US federal law that was enacted on March 18, 2010 to target US persons that conceal assets held in foreign accounts.

As a result purely residing in the UK will cause Ms Markle to disclose any finances which she may start to accumulate in the UK, which of course might start to include, after marriage one would suspect, those currently owned solely by Prince Harry.

Looking toward the future, their joint assets could come under scrutiny as part of her US tax reporting obligations and any future children would similarity be subject to US reporting if they adopt dual-nationality.

Maybe her requirement to report starts sooner though as respected US tax expert David Treitel is said to have commented that “I strongly suspect that the engagement ring Meghan received on Monday could be worth more than US$100,000,” and “If so, this would oblige her to file IRS Form 3520” formally known as the Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, adding that “In any event she will need to have the ring valued, as a gift, for IRS reporting purposes, and potentially could suffer a US$10,000 penalty if she fails to disclose it to the IRS.”

Sound complicated? Well it is and that’s why so many UK advisory firms won’t take on a US citizen as a client, preferring not to advise rather than become competent in giving them guidance.

So, is giving up her US passport a solution? Not really, as the US doesn’t like to let you go very easily, and typically relinquishing your citizenship can take years to achieve, and generally only after the payment of an “exit tax” that is based on the individual’s wealth, which could therefore be quite significant in this instance.

As you can guess I therefore read with interest the announcement that a member of our Royal Family would be married to a US citizen and chose to tweet my comment, attracting attention from a number of people with an interest in the subject, mainly those opposed to the current position. It’s unlikely that any of this will change in the foreseeable future so I ensure that my US connected clients are alerted to their obligations, receive specialist UK/US tax guidance and get synchronised financial advice to minimise any possible double taxation from across the pond. Expert assistance is needed.

If you are yourself or know someone who might be affected by this please do get in touch. First consultation at our expense.

 

Mark Ireland ALIBF

This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case. It does not constitute legal or tax advice and must not be treated as such. All statements concerning taxation are based on our understanding of the current law and practice, as at the date of publication. Levels and bases of, and reliefs from, taxation are subject to change.  The provision of advice in relation to taxation is not a regulated activity.