As a result of substantial pressure by U.S. tax authorities on banks in the United Kingdom, many British citizens born in the United States are currently at risk of having their accounts in British banks frozen. The Brits involved are those born in the U.S., but who left when they were just a few months or a few years old. Many fear that they are being pursued to pay taxes for which they never had knowledge were even due.
Many of these Britons have never worked a day of their lives in the US. Nonetheless, American banks are hounding them for their American tax identification numbers to collect taxes that are supposedly past due. If these accidental Americans, born in the United States but who then left the country at a very young age, fail to comply, they risk having their assets frozen by British banks.
The United States is one of two countries in the world, Eritrea the other, that taxes non-resident citizens on the income they earn internationally. The 2010 Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions, including UK banks, that operate in the United States, to report information about U.S. taxpayers to the Internal Revenue Service.
Meanwhile, British banks are wary of U.S. regulators fining them if they continue to serve “U.S. citizens” but fail to share information with the IRS. Banks and investment platforms are hastily trying to uncover information about customers who are dual nationals before the end of 2019 when a grace period for avoiding penalties expires.
The European Banking Federation estimates that there are nearly 300,000 accidental Americans in the European Union. How many are in the UK? It is presently unknown, but the number is comparable to the number of accidental Americans in France, where the U.S. has targeted 40,000 citizens.
U.K. prime minister Boris Johnson, who was born in New York but left when he was five years old, brushed elbows with the IRS in 2014. Johnson renounced his American citizenship after the IRS attempted to tax him on the sale of his home in London. Johnson’s reaction to his U.S. tax bill? “Absolutely outrageous.”
Labour MP Preet Kaur Gill is currently applying heat to Johnson on the subject based on her concerns about the financial burden that accidental Americans experience. Specifically, the substantial cost involved as they are forced to pay either hundreds of pounds in extra tax each year or a fee of $2,000 to renounce their citizenship.
The Pensioner from Cambridge
In one example of the harshness of these actions by the U.S. taxing authority, Barclays has sent increasingly urgent letters to a 74-year-old living in Cambridge demanding her American tax identification number.
Her reaction? She had assumed that her US citizenship had lapsed. After all, the septuagenarian left the US on the RMS Queen Elizabeth in 1947 at the young age of 18 months old.
The pensioner said that she spent £11,300 of her retirement funds to pay a specialist accountant for assistance to renounce her citizenship, obtain a social security number, file five years of back taxes, and declare her entire portfolio of assets.
The pensioner in Cambridge objected to the IRS targeting accidental Americans: “It was a big net cast to catch these big fish, these sharks, hiding American money abroad. In fact, they haven’t caught very many of those and instead caught little minnows like myself.” The pensioner, who did not want her name published, said: “I felt hounded … I didn’t understand U.S. tax law.”
If you live in the New York or the Tri-State area and have any questions about any tax-related issues, especially those related to U.S. tax law, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
