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I am looking for an ISA trading account that can be opened by US citizens that are UK residents.

There seems to be a general trend towards brokers in the EU not wanting to do business with US citizens.

Interactive Investor for example does not allow US citizens to open accounts.

Straight from the support team at interactive investor:

"We are unable to open accounts for US citizens. We are not the only broker who has made this decision, but other brokers may be able to offer you an account"

I supposed that they are doing this to avoid regulatory headaches, but don't know much about the matter.

Does anyone have any recommendations or is it basically impossible?

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    You are a UK resident ? I am not sure why they are stopping you ? Could you post under what reasons they are refusing you. – DumbCoder Apr 4 '14 at 14:05
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    Are you paying UK tax, i.e. do you have UK income? – Vicky Apr 4 '14 at 15:06
  • I am a UK resident. I have a UK income and pay taxes in the UK. – lambda Apr 5 '14 at 18:18
  • Updated question with quote from the support team at Interactive Investor. – lambda Apr 5 '14 at 18:22
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This sounds like a FATCA issue. I will attempt to explain, but please confirm with your own research, as I am not a FATCA expert.

If a foreign institution has made a policy decision not to accept US customers because of the Foreign Financial Institution (FFI) obligations under FATCA, then that will of course exclude you even if you are resident outside the US. The US government asserts the principle of universal tax jurisdiction over its citizens. The institution may have a publicly available FATCA policy statement or otherwise be covered in a new story, so you can confirm this is what has happened. Failing that, I would follow up and ask for clarification.

You may be able to find an institution that accepts US citizens as investors. This requires some research, maybe some legwork.

Renunciation of your citizenship is the most certain way to circumvent this issue, if you are prepared to take such a drastic step. Such a step would require thought and planning. Note that there would be an expatriation tax ("exit tax") that deems a disposition of all your assets (mark to market for all your assets) under IRC § 877.

A less direct but far less extreme measure would be to use an intermediary, either one that has access or a foreign entity (i.e. non-US entity) that can gain access. A Non-Financial Foreign Entity (NFFE) is itself subject to withholding rules of FATCA, so it must withhold payments to you and any other US persons. But the investing institutions will not become FFIs by paying an NFFE; the obligation rests on the FFI.

PWC Australia has a nice little writeup that explains some of the key terms and concepts of FATCA.

Of course, the simplest solution is probably to use US institutions, where possible. Non-foreign entities do not have foreign obligations under FATCA.

  • Thanks NL7! I don't think many people (US citizens included) are aware of this. Giving up my citizenship is out of the question. But it sounds like finding an EU-based broker that is willing to work with me is also close to impossible. It's a shame though since the ISA is such a good deal. I guess it's back to e-trade then. – lambda Apr 5 '14 at 18:26
  • @lambda It's not really such a good deal any more. The Personal Savings Allowance means that, for most people, all interest earned outside an ISA will be tax-free anyway (up to £1000 for basic rate taxpayers, up to £500 for higher rate). You're probably eligible for a regular savings account. The only problem with them being that you can only pay in in small increments. – Michael Apr 20 '18 at 8:58
  • An ISA is an amazing deal for UK citizens as it allows you to remove £20k pa from capital and income tax – Neuromancer Apr 20 '18 at 13:17
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NL7 is most likely right. With the rise of regulatory burden some financial institutions are refusing to do business for which they are at risk of not being compliant (because of complexity) or where being compliant is to onerous.

Would suggest you have a look at

  1. TD direct investing. (I am client) Service is what it is worth but they seem to be well aware of all the tricks involved when dealing in the US (W-8BEN forms and so on). They are also pretty big there
  2. Does your bank offers trading account ? They already have you on the books so they are dealing with regulation like FATCA. Costs will be much higher than an exec only service but if you have no choice ...

Good luck

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    Note that TD direct investing have been taken over by interactive investor now. – Tim Apr 20 '18 at 7:57
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I am a US citizen by birth only. I left the US aged 6 weeks old and have never lived there. I am also a UK citizen but TD Waterhouse have just followed their policy and asked me to close my account under FATCA. It is a complete nightmare for dual nationals who have little or no US connection. IG.com seem to allow me to transfer my holdings so long as I steer clear of US investments. Furious with the US and would love to renounce citizenship but will have to pay $2500 or thereabouts to follow the US process. So much for Land of the Free!

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While you may be ineligible, as other answers have stated, it's not necessarily such a good deal any more. The Personal Savings Allowance means that, for most people, all interest earned outside an ISA will be tax-free anyway (up to £1000 for basic-rate taxpayers, up to £500 for higher-rate). You're probably eligible for a regular savings account. The only real problem with them being - actually the entire point of them - is that you can only pay in in small increments.

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