A portfolio both tax systems can live with.
UK funds are PFICs to the IRS. US funds without UK reporting status turn gains into income for HMRC. The overlap of investments that work cleanly in both systems is small — and knowing it is the difference between compounding and leaking.
Both systems punish the other's funds
The PFIC regime taxes UK fund gains at top rates with an interest charge; the UK's non-reporting fund rules tax US ETF gains as income instead of capital. A portfolio built innocently on either side can be quietly bleeding several percent a year to avoidable tax treatment.
We audit what you hold, quantify the damage, and map the clean-up — including HMRC-reporting US ETFs that both systems treat rationally.
- PFIC audit of existing holdings, Form 8621 where needed
- UK reporting-fund status checks on US holdings
- Restructuring plans that manage the exit cost
- Dividend withholding and W-8/W-9 positioning
Wrappers don't cross the border
ISAs are taxable to the IRS; Roth IRAs need a treaty claim in the UK; SIPPs are protected but their contents can still raise questions. Which wrapper to fund — and which to stop funding — depends on which side of the Atlantic your future sits on.
What we typically handle for you
- PFIC audit of existing holdings
- Form 8621 preparation per fund
- UK reporting-fund status checks on US ETFs
- Purge-and-rebuild modelling with exit costs
- Compliant portfolio design for both systems
- Dividend withholding and W-8/W-9 positioning
- Wrapper strategy: ISA vs GIA vs pension
- Capital gains reporting on both returns
The services that usually apply
Questions we get about this
A UK designation that lets gains on an offshore fund be taxed as capital rather than income for UK investors.
Buying a non-reporting fund without noticing is a common and entirely avoidable way to convert a capital gain into income.
Direct holdings avoid the PFIC regime entirely, which removes the worst of the US problem.
The trade-off is diversification, so it is a portfolio design question rather than purely a tax one.
Both may tax them, with the treaty allocating and credits relieving the overlap, and rates depending on the source and your residence.
Withholding at source can also apply, and reclaiming over-withheld tax is a separate exercise.
If you are a US person, most likely. Unit trusts, OEICs and investment trusts are typically PFICs, with punitive default treatment and per-fund annual reporting.
The size of the holding does not reduce the reporting burden, only the tax at stake.
The mirror problem exists. Offshore funds without UK reporting fund status can have gains taxed as income rather than at capital gains rates.
Checking reporting fund status before buying is far cheaper than discovering it at disposal.
It is usually a question of choosing wrappers and funds that are recognised by both, rather than optimising for one and accepting the other.
Direct holdings and appropriately domiciled funds frequently avoid the worst of both regimes.
Last reviewed . Thresholds and rates change annually — check figures against the current tax year before relying on them.
Holding funds on the wrong side of a border?
We will tell you what your portfolio actually costs you in reporting, and what a cleaner one looks like.