The first big achievement of Donald Trump’s presidency is his tax reform Act passed, with commendable speed (or undue haste), last December. Sadly the rapid passage of the Act means that it is riddled with anomalies and uncertainties.
In particular many of the handouts to individuals are restricted to those actually living in the USA. The Act creates major issues for Americans living in the UK. And remember that if you hold a US Green Card you are taxed as if you were an American citizen, so a lot of UK nationals are likely to be affected by the reforms.
In the past, most UK resident Americans paid little or no UK tax because double tax relief and the foreign earnings exclusion eliminated the US tax charge. But double tax relief is of no help if what is taxable in the US is notional income. More UK companies with American shareholders have become controlled foreign corporations under the Trump reforms (if over 50% is held by US citizens or Green Card holders) and the CFC rules tax the shareholder on income of the company. Trump’s 10% transition tax can impact those who own as little as 10% of a UK company.
Even if you are not a Green Card holder, the new rules can make investment in the UK by Americans less attractive, so it is important that UK businesses understand the impact of these changes.
The changes may well impact on the following:
- US citizens/green card holders living in the UK
- UK citizens with a US spouse
- UK business investing in America
- American companies investing in the UK
- American individuals investing in UK business
- American individuals investing in UK real estate
- Existing UK companies controlled by Americans
Through CBW’s international association, DFK International, we have colleagues in the US who are working with our clients to guide them through the implications of the US tax reforms for UK residents and how Americans are likely to want to structure investment into the UK in future.