More Americans giving up citizenship to escape taxes and regulations

The title in the Financial Times is pretty clear: Americans forfeit citizenship to avoid tax.

The number of wealthy Americans living in the UK who are renouncing their US citizenship is rising rapidly as more expatriates seek to escape paying tax to the US on their worldwide income and gains and shed their “non-dom” status, accountants say.

As many as 743 American expatriates made the irreversible decision to discard their passports last year, according to the US government – three times as many as in 2008.
The trend was particularly noticeable in the UK, where 190,000 Americans live and work. There is a waiting list at the embassy in London for people looking to give up citizenship, with the earliest appointments in February, lawyers and accountants say.

A few advantages are gained by forfeiting US citizenship, accountants say, in addition to keeping assets out of the US tax net. One is that doing so helps people who are interested in becoming domiciled in the UK, which has some inheritance tax benefits, particularly if you are married.

“If you have given up your US citizenship and are a long-term resident in the UK, it is a benefit if you are looking to acquire a UK domicile,” says Nick Osler, a tax director with Smith & Williamson, the advisors.

Another positive is that investments in individual savings accounts and self-invested personal pensions will not draw scrutiny from the Internal Revenue Service and remain tax-shelters, say advisers at London & Capital, the wealth management firm.

“Giving up your US passport doesn’t necessarily mean that you are able to become domiciled in the UK. But if you give up your US green card or your passport, you may have scope for that offshore money to stay out of the US tax web as well,” says Mike Warburton, tax director with Grant Thornton, the UK accountants.

“The big disadvantage with American citizens is they catch you on tax wherever you are in the world. If you are taxed only in the UK, you have the opportunity of keeping your money offshore tax free.” . . .