US expat SIPP [UK]

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scion
Posts: 1
Joined: Sun Jun 20, 2021 9:39 am

US expat SIPP [UK]

Post by scion »

There are a few (AJBell at least) that allow US investors to open a SIPP and can invest in Vanguard funds (many of which are US and UK reportable). However, my what I can tell a SIPP is similar to an IRA and protected under the US-UK tax treaty but by US law can only invest up to $6000/year. If I wanted to invest more coud I claim excess as a regaular investment in the US? I would pay tax on the gains as normal but would benefit from the top-up the UK offers to SIPP holders.
My question is does anyone know if its allowable and beneficial to invest in a UK SIPP while claiming its a regular taxable account in the US. Using reportable Vanguard funds I can dodge the PFIC issues. Thank you.
TedSwippet
Posts: 3747
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: US expat SIPP [UK]

Post by TedSwippet »

Welcome. I'm assuming you are a US citizen and a UK tax-resident. Please say if this assumption is wrong.
scion wrote: Sun Jun 20, 2021 9:48 am My question is does anyone know if its allowable and beneficial to invest in a UK SIPP while claiming its a regular taxable account in the US.
It can be. The treaty is elective; that is, you can choose whether or not you want it to apply to a UK pension. If you choose not, then a UK pension is, to the US, the same as an unwrapped general investment account.

Not electing the treaty means you could use the UK pension to 'soak up' any unused US foreign tax credit. For example, outlined in this article:

UK AND US PENSIONS FOR US TAXPAYERS - PJD Tax

This works best where you return to the US for retirement. In this case, you can use the treaty to make withdrawals from a UK pension taxable only to the US, but potentially (close to) US tax free because you have effectively already pre-paid the US tax via the aforementioned US foreign tax credits.
scion wrote: Sun Jun 20, 2021 9:48 am Using reportable Vanguard funds I can dodge the PFIC issues.
This part of things is likely to be problematic. UK SIPP providers and other UK platforms all adhere to PRIIPs regulations, and under these regulations they cannot currently offer US domiciled funds or ETFs to UK resident investors. A bit more in the wiki:

US tax pitfalls for a US person living abroad - Bogleheads
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