What's a boy to do - moved back to Blighty

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
rjm_cali
Posts: 152
Joined: Thu Apr 10, 2014 1:52 pm

What's a boy to do - moved back to Blighty

Post by rjm_cali »

OK so I've now moved back to the UK after ten years in the US. I've surrendered my GC, am about to do our final joint tax return (wife is USC). I switched all my US investments with Vanguard to UK reporting ETFs before I left the US. I then moved them to a US IBRK account. I have now opened a UK IBRK account and transferred all positions from the US to the UK.

I'm presuming I need to send Vanguard the tax treaty form so they don't tax me at 30% which I should have done when I first arrived but had so many other things to do.....

Question is - do I sell the US ETFs and switch to local ETFs and completely sever any link with US investing. Obviously the fees are higher on the European ETFs but I'd like to move from the VOO/VTI I currently have to probably SWDA to reduce a total focus on the US stock market but that's a discussion for another day. Any reason to keep VTI and VOO. Not expecting to need to touch them for a few years.

I would prefer to sever all financial links with the US and the IRS. Paying them tax on dividends just reminds them I'm still around.

I'm retired btw.
smectym
Posts: 1530
Joined: Thu May 26, 2011 5:07 pm

Re: What's a boy to do - moved back to Blighty

Post by smectym »

Congratulations on the relocation. You seem to have answered your own question; unless there are arcane tax or other regs I’m unaware of, if your pref is to make the clean break, see no reason to delay completing the handoff to UK investment products. Are you sitting on significant unrealized capital gains on your remaining U.S. ETF’s? Even if so, probably best to sell, pay tax and be done with it.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: What's a boy to do - moved back to Blighty

Post by TedSwippet »

rjm_cali wrote: Sat Mar 11, 2023 5:28 am I switched all my US investments with Vanguard to UK reporting ETFs before I left the US. I then moved them to a US IBRK account. ... I'm presuming I need to send Vanguard the tax treaty form so they don't tax me at 30% ...
Unless you hold any of these investments directly with Vanguard, or have left a 401k, IRA, or other stuff with Vanguard, there's no need to send Vanguard a W-8BEN. If your only Vanguard holding is VOO and VTI at IBKR, it is IBKR who need (and likely already have) a W-8BEN, since they are the party who will be dinging you for 15% US/UK treaty rate tax on dividends paid by these ETFs.
rjm_cali wrote: Sat Mar 11, 2023 5:28 am Any reason to keep VTI and VOO.
Notwithstanding a desire to move to a more globally balanced portfolio, there are some modest but useful tax advantages to retaining these ETFs now that you have them.

Firstly, you can claim a UK tax credit for the 15% broker withholding US tax you will pay on dividends; if you held equivalent Ireland domiciled ETFs instead, the ETFs themselves would pay 15% internally to the US, but since it's not directly paid by you, there is no way to claim back that 15% against US tax. This works best where your UK tax on these dividends is 15% or higher. If it would be (say) 0%, all income below the annual tax-free allowance, there's no tax gain (or loss) either way relative to Ireland domiciled ETFs.

Secondly, the TER on these ETFs is slightly below the OCF for an approximately equivalent Ireland domiciled ETF. Not massive, perhaps 0.04% compared to 0.07%, but could be worthwhile if your holding is sizable.

And third, at the moment (consultation in progress) UK investors cannot buy these ETFs, only hold or sell, so selling could be a one-way street. No going back.

Given these efficiencies, if it were me I'd probably retain at least enough of these to satisfy my portfolio allocation to US stocks. If you are going to sell though, take care around UK capital gains tax. The allowance falls in April from £12k to £6k, and then again the next April to just £3k, so could be worth doing very soon if on the cards. Note that the UK taxes the gain based on the difference in GBP between purchase and sale; that is, you have to look at the USD/GBP rate when you bought these ETFs and then the rate on sale, with the result that any currency gain (or loss) feeds into your overall capital gain.
rjm_cali wrote: Sat Mar 11, 2023 5:28 am I would prefer to sever all financial links with the US and the IRS. Paying them tax on dividends just reminds them I'm still around.
The IRS won't get much of any information about you. IBKR is responsible for withholding 15% for US tax on these ETFs and sending that to the IRS. Assuming this is your only US source income, you don't have to do anything at all; no 1040-NR or other US tax filing.

Are you eligible for and claiming US SS yet? If yes, make sure that the SSA knows you are in the UK and a US nonresident alien. Rather than deal with the SSA mother ship, you can work through the FBU in the US embassy in London. These folk know how to handle UK residents; the lead time on getting their attention can be a bit lengthy, but once you have it they are excellent.
Topic Author
rjm_cali
Posts: 152
Joined: Thu Apr 10, 2014 1:52 pm

Re: What's a boy to do - moved back to Blighty

Post by rjm_cali »

Thanks Ted - some interesting and timely points to mull over there. I suspect I will hold onto them for a bit longer as there are some other financial issues that won't become clearer for a little while yet. I cleared up some long term CG with some TLH last year so there's not much to worry about in terms of CG and I hope to remain in the fortunate position that they don't need touching for a good few years yet.

Good reminder about the SS issues. I'm not going to get any SS myself but am due spousal benefit so will be looking into that.
Post Reply