Passive Foreign Investment Companies (PFICs) are a serious headache, and something Americans really need to watch out for when considering how to invest while you’re living in the UK.

PFICs are “pooled investments” registered outside the US whose income is primarily “passive.” This includes mutual funds, ETFs, hedge funds, insurance products, etc. that are registered outside of the US.

In many cases, US expats in the UK may wish to avoid investing in PFICs altogether, because the tax rates will be much higher than for similar US-based investments, and because the reporting requirements are particularly onerous.

What is a PFIC?

A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets one of the following two tests:

1. 75% or more of its gross income is “passive,” which can include capital gains, dividends, royalties, rents, and annuities.
2. 50% or more of its assets produce passive income

Unfortunately, many UK-registered investment products qualify as PFICs, including mutual funds, ETFs, hedge funds, etc. Tax-incentivised savings products such as ISAs can also be affected, meaning if you invest in a stocks & shares ISA, gains could be taxed at a much higher rate than in the UK. Even a UK-registered fund that invests solely in US-based companies would qualify as a PFIC, though a US-registered fund investing solely in UK-based companies would not.

Here are a few examples of funds that are considered PFICs

• Vanguard funds registered in Ireland
• Index funds on Hargreaves Lansdown

Why PFICs matter: they are taxed punitively

The IRS taxes PFICs at punitive rates to discourage you from moving your income outside the US federal tax net, meaning that in many cases similar products (mutual funds, ETFs, etc.) that are registered in the US rather than in the UK will be taxed at a lower rate and be much less onerous from a paperwork perspective.

Example:  if Sally is invested in a US-based mutual fund that tracks the global economy, she will pay the IRS a low, long-term capital gains rate of 0-20% (depending on your income) if the fund is held for more than a year. If Sally decides to buy a nearly identical fund listed in the UK, that investment will be subject to the PFIC tax regime, which counts all income (including capital gains) as ordinary income and automatically taxes her gains at the top individual tax rate of 39.6%.

So...what exactly are the tax implications?

Tax rates for PFICs can be very complex (you can read more about the complexities from KPMG here), but a good rule of thumb is that they will generally be taxed at the highest possible rate for the type of distribution. Since PFICs do not qualify for capital gains rates, this generally means the highest possible marginal tax rate (currently 39.6%). Deferred gains receive an interest charge for the entire time period that the gains are held in the PFIC (meaning the total tax can often be over 50%!).

The above is the default method of taxation; you may be able to avoid the highest tax rates by electing to use one of two methods:

• The Qualifying Elective Fund (QEF) rules allow you to be taxed on the sale of a PFIC at Capital Gains rates rather than the punitive PFIC rates mentioned above. This only applies to PFICs that are willing and able to disclose an Annual Information Statement each year that meets the requirements of the IRS. Making a QEF election will require you to report and pay tax on your pro rata share of the PFIC’s ordinary earnings and net capital gains each year, regardless of whether those gains were distributed to you. In other words, you might have to pay taxes on money you have not yet received, though in some cases this still may be worth it.
• The Mark-to-Market accounting method allows you to have your PFIC gains taxed at your marginal tax rate. In most cases your marginal tax rate will still be higher than the capital gains rates you would expect on similar funds in the US, but this method is less punitive than standard PFIC taxes.

Again, it is worth working with a tax specialist and/or financial advisor to help determine what the best route will be given your specific situation.

Reporting Requirements

In addition to high tax rates, PFICs present complications (and compliance costs) as far as reporting is concerned. You are now required to submit a separate Form 8621 for every PFIC each year, and the IRS estimates that completing the form can take as long as 22 hours. So we’re talking thousands of dollars per investment per year to simply comply with the reporting requirements.

It is important to note that you will not need to submit Form 8621 if the total value of all of your PFIC stock on the last day of the tax year is less than $25,000. This doesn’t mean that this income won’t be taxable, or that it will be subject to preferential capital gains rates; merely that you (a) don’t have to spend huge amounts of time dealing with reporting requirements and (b) you won’t be risking the most punitive of the PFIC taxes.

Our recommendation: Proceed with Caution

For most Americans, investing in PFICs doesn’t make much sense. Doing so is likely to be less lucrative (and much more complicated!) than sticking to US-based funds. If you believe PFICs are a good option for you, we highly recommend seeking the advice of an international tax specialist to make sure you can avoid high fees and penalties.

Oh, and the fun doesn’t stop there: once you’ve been domiciled in the UK for long enough, you’ll also be subject to punitive UK tax rates on your non-UK-registered investment funds if they do not report to UK accounting standards.

Are you a U.S. citizen looking to buy your main residential property in UK ? There are additional mortgage and tax implications you’ll need to consider as an American buying a house in the UK. It’s worth noting up front: this article focuses on buying your primary residence - so we do not cover the tax/mortgage implications of investment or rental properties.

TL:DR

• Your UK residency status (right to remain) might affect your options for where to obtain a mortgage
• All UK home buyers have to pay Stamp Duty Land Tax and there will be an extra cost if you own a home already, even if it’s abroad
• Make sure the source of funds for your down payment are ‘clean’ from HMRC standpoint - and if you’re receiving gifts for the deposit - your lawyers will need to conduct anti money-laundering checks, which can be onerous.
• You may want to consider a home mortgage interest deduction in the U.S., but this only makes sense when you are in a higher income household.
  

Your residency status will affect your options for Lenders

UK lenders’ attitudes towards you (as an American citizen) will depend on your visa situation and how long you’ve been in the UK. Some lenders will not work with US clients at all, some might lend as long as you meet certain criteria, and others will require that you have lived in the UK for a certain amount of time.

The general rule of thumb on this is:

• If you have indefinite right to remain in the UK, you are likely to easily obtain a mortgage with high street lenders.
• If you reside in the UK on a definite visa of some sort, you’ll have fewer options.
• If you are paid in a foreign currency - this will make finding a mortgage lender extremely challenging, meaning you might have to seek financing from a private bank (Source: FT).
  

Expect Stamp Duty Land Tax (SDLT) in the UK

SDLT is a progressive, one-off tax that all residents in England and Northern Ireland must pay (if you’re in Scotland: it’s Land and Buildings Transaction Tax and Wales: Land Transaction Tax).  If you buy a property/land over a certain price (£125k as of 2020), you will pay SDLT and the amount depends on the value of your property. This article from Money Advice Service discusses everything you need to know about SDLT (including the breakdown of costs), and you can use the HMRC Stamp Duty Calculator to understand how much you will need to pay based on your unique situation. It could range from anywhere between 0 - 11.78%.  

Buying your first home (ever)? In the UK, you are generally classified as a first-time buyer if you’re purchasing your main residence and have never owned a freehold property (full ownership of the property and land on which it stands) or a leasehold property (ownership of the property whilst the land is owned by the freeholder) in the UK or abroad. If you’re a first-time buyer in England or Northern Ireland, you will pay no Stamp Duty on properties up to £300,000 (which saves you £5k in tax). For properties costing up to £500,000, you will pay no SDLT on the first £300,000 and pay SDLT on the remaining amount. More on this from the HMRC’s guidance on relief for first time buyers.

Buying an additional home? If you already have another home (even if the property is located in the U.S. or elsewhere),  you will have to pay an additional 3% of SDLT on top of the current rates for each band. This 3% extra rate applies for all existing properties bought for £40,000 or more (which is not hard to do!). If you sell or give away your previous main home within 3 years of buying your new home, you can apply for a refund for this SDLT extra rate (Source: Money Advice Service).

In order to avoid this ‘second home’ tax altogether , some expats might consider ‘gifting’ their house to a family member (but it must be someone who is not involved in their current purchase) before they buy their home in the UK. This requires careful attention - you may be subject to ‘disposing of property’ taxes / gift rules from both US and the UK.

Depending on the nature of the other property that you own, the costs of your first property may be factored into the affordability calculation by your UK lender (Source: FT). On the flip side, when you eventually sell your UK property - remember that SDLT will be considered a cost basis to the IRS - meaning they count it as part of the original cost of property, which will reduce the amount of capital gains tax owed to the IRS. In the UK, you don’t have to worry about capital gains tax on your primary residence.

Make sure your source of funds are ‘clean’

If you transfer funds into the UK from the US - you need to be sure that these will be considered ‘clean’ from HMRC’s perspective or whether there will be a tax charge when you bring this money to the UK. The rules for this will depend on whether you are taxable on an arising or remittance basis.

For UK residents taxed on an arising basis:

• Your foreign income is taxed on an arising basis, which means you should already be submitting self-assessment tax returns to HMRC. If you need to pull money out of any U.S. investments to pay for your home, be sure to think carefully about how the IRS and the HMRC will tax any gains you have made on your capital.
• You will likely be taxed by HMRC on gains, but you will also be able to claim a tax credit for any taxes paid in the U.S.
• Since you are taxable on an arising basis, you will also be entitled to HMRC’s annual capital gains allowance as well.

For UK residents taxed on a remittance basis:

• If your offshore money has never been invested, or was invested before you became a resident in the UK - it is considered ‘clean’ and can be brought or ‘remitted’ to the UK without a tax charge (Source: FT).
• Any gains or income held offshore and not brought to the UK are ignored by HMRC - until you have been a UK resident more than 7 out of 9 years. At this point, your foreign income is taxed on arising basis of your worldwide income and gains (Source: FT).
  

Expect Anti-Money Laundering checks on any gifts

If you are receiving financial gifts to help you with your deposit, be aware that your conveyor (i.e. the lawyer responsible for transferring the legal title of property from one person to another) will have to perform anti-money laundering checks, which is a standard UK procedure. You can read more about AML at the UK Law Society). Some Conveyors do not provide this service for gift transfers from overseas, so be sure to check this upfront with your Conveyors.

To provide evidence of where the gift has come from, you will likely need to show:

• Bank statements from your account which show where the money was transferred to
• Bank / transfer statements from the giftor
• Proof of your giftor’s identification (e.g. copies of passports and Utility bills).

You won’t normally have to report your Mortgage to the IRS

You don’t have to report your mortgages (and other loans) to the IRS or via FBAR or FATCA forms, because mortgages do not have a cash balance. The only exception is if you obtain an Offset Mortgage. An offset mortgage is where you have a savings account and a mortgage with the same lender, and you use your cash savings to reduce – or 'offset' – the amount of mortgage interest you're charged.

If you choose the offset route - make sure you report this account within the FBAR and FATCA. Additionally, the IRS will consider any interest made on this account taxable - whether you keep the money in the account, transfer it to another, or withdraw it. You’ll therefore need to report this interest  income to the IRS, even if it’s just a few dollars (source: Investopedia).

In the UK - You have a ‘personal savings allowance’ - meaning a certain amount of your interest is tax-free, depending on your income rate. So you’ll need to consider this as well if you choose the ‘Offset route’. Here’s the breakdown of HMRC’s personal allowance:

• £1k if you’re in the basic income rate
• £500 in higher rate
• £0 in additional rate

If you are over your personal savings allowance you will pay your usual rate of income tax on the interest (read on: UK income on savings).

U.S. Home Mortgage Interest Deduction

In the US you can offset your mortgage interest using a home mortgage interest deduction. This means you can lower your taxable income by subtracting the interest you are paying on a mortgage each year from your income, which means you will be taxed less overall. You can only do this on your primary residence or second home, and can only deduct the first $750,000 of debt used for acquiring / constructing / substantially improving your residence (source: Investopedia).

Itemising doesn’t necessarily make sense for everyone. Since it only makes sense if your itemized deductions total more than the standard deduction (which is $12,400 for individuals in 2020). Read this investopedia article to read more about whether it makes sense for you.

You may also be able to deduct your moving expenses, and you can use this IRS moving calculator.

Buying a UK property: what we would do

• Take extra care to ensure our funds for the house are clean
• We would pay close attention to Stamp Duty Land Tax - particularly if we already own another property that we are holding onto. Getting this right can bring big savings.
• We probably would not consider itemising our mortgage interest - just because we aren’t massive earners.
• We would keep a detailed record of all transactions related to the purchase of the house, as well as other major renovation expenditures. This will be useful down the road when we are looking to sell - because they will form the ‘cost base’ to IRS and HMRC.
  
  

As a US Citizen or permanent resident living in the UK, you have to comply with the tax laws of both the UK and the US, and it can get complicated (and seem scary). In this article, we will walk through the most important components of both country’s tax systems, so that you know what you are up against and are aware of the key issues you will want to consider to ensure you are complying with the laws of both countries while optimizing your own tax situation

US Tax Implications

TL;DR

You’ll still have to pay taxes to the US whilst you are living in the UK.  That said, a double-taxation treaty between the two countries means that you can most likely avoid double taxation of your income if you take advantage of certain mechanisms for reducing tax liability available to  US citizens or permanent residents living abroad.

US Worldwide Tax

The US is one of two countries in the world that taxes its citizens and resident aliens on income earned anywhere in the world (what is known as ‘Worldwide Income’).  Unfortunately, this means most types of income earned whilst you are living in the UK (including capital gains and property) are subject to US income tax, and that you will need to file an income tax return in the US every year. It is also worth noting that you automatically get a 2-month filing extension to June 15th as an American expat. (Source: IRS, KPMG)

Thanks to the 2001 UK/US Double Taxation Convention, you are unlikely to be taxed twice on the same income, but the U.S. Worldwide Tax adds additional layers of complexity and potentially more cost (particularly to investment income) (Source: UK Government site). For instance, it might mean that certain tax-free mechanisms (like the Individual Savings Account - ISA - in the UK) might not be recognised in the US, and therefore subject to US tax.

US Tax Relief

There are a few ways to avoid double taxation and to reduce or eliminate your US tax liability while you are living in the UK. Taking advantage of these US-based relief programs can often require complex calculations and multi-year planning. This section will give you an overview of the issues, but it may be worth speaking to a tax professional to determine how best to handle your  specific situation.

Foreign Earned Income Exclusion (FEIE)

The FEIE allows US taxpayers to exclude up to $105,900 (2019) or $107,600 (2020) of their of foreign earned income from their taxes. To qualify: you must have foreign earned income, your tax domicile must be in the UK, and you must either pass the A) bona fide residence test or the B) physical presence test. Earned income does not include “passive income” such as interest and dividends, which will be taxed separately (see PFIC). (Source: KPMG).

For some taxpayers, it may not make sense to claim the FEIE, which offsets income taxed in the lowest brackets, rather than the highest (known as the FEIE ‘stacking’ rule). Given that the UK has higher tax rates than the US, it may be beneficial to explore other options, including Foreign Tax Credit and itemized deductions. Another consideration when deciding whether or not to participate in the FEIE (taxpayers must formally elect to participate in the FEIE “program”) is that taxpayers who revoke participation may not be eligible to participate in the program for seven years.  (Source: KPMG).

Foreign Housing Cost exclusion (FHCE)

If you elect the FEIE, you can also qualify for the Foreign Housing Cost Exclusion (or the Foreign Housing Deduction, if you are self-employed), which allows you to exclude or deduct housing-related expenses over 16% of that year’s FEIE exclusion, effectively increasing the total sum you can exclude per tax year.

Qualified housing-related expenses include rent, utilities, personal property insurance, furniture rentals. The cost of household labor (cleaners, cooks), mortgage payments, furniture purchases, etc. cannot be included.

You’ll also need to make sure that your housing-related expenses do not exceed the maximum housing expenses limit, which is usually set at 30% of FEIE but can be higher for places the IRS recognises has a high cost of living (including the UK!). You can access a full list here (see page 11).

Example: Bob works for Company X in London. In 2019, Bob’s housing-related expenses were $35,000. Since $35,000 is greater than the base rate of 16% of 2019’s FEIE exclusion amount of $105,900 ($16,944), he qualifies for the housing allowance. To calculate Bob’s housing allowance, we subtract the base rate from the total housing-related expenses ($35,000 - $16,944 = $18,056. Bob can now add $18,056 to the 2019 FEIE exclusion amount of $105,900 to get his total exclusion amount for 2019.  In other words, by taking advantage of both the FEIE and the Housing Exclusion, a total of $123,956 of Bob’s income is exempt from US taxation.  

Foreign Tax Credit (FTC)

The FTC is essentially a dollar-for-dollar credit on the taxes you pay to a foreign country. Since the UK has higher tax rates than the US , then the FTC may help you offset or completely eliminate your US tax liability. For anyone whose income exceeds the limits laid out under the FEIE, the FTC can be the better option. To claim a tax as a FTC, it must be an income tax, war profits tax, or excess profits tax, or a tax paid in lieu of one of those.

Say for instance Bob earns £100k in the UK in 2019. The HMRC taxed Bob approx. £35k. If he had instead lived in the US, he would have only been taxed £31k, which gave him a £4k tax credit in the US through the FTC scheme. He can carry this over as a tax credit in the US for the next ten years to offset future tax liabilities.

Itemized Deductions

Using Itemized Deductions (as opposed to standard deductions) for your US tax return allows you to deduct certain expenses from your taxable income, including foreign tax paid. In some instances (ie if you have high medical expenses or mortgage interests), this can be a better option than claiming the FTC. However, this route can also require a significant amount of documentation. Again, we would recommend speaking with a professional to explore whether this is a good option for you. But you can first learn more by reading this page from the IRS for more details on FTC versus itemized deductions).

Income earned in the US

Any income earned in the US (referred to as ‘earned income’) is obviously not considered foreign by the IRS and therefore cannot be excluded from US taxes. However, if you are required to pay UK taxes on your US income, you may be able to use the Foreign Tax Credit as a dollar-for-dollar credit to offset the US taxes you owe.

FBAR AND FATCA

As stated above, all US citizens and resident aliens are required to file a US tax return every year.  The US government may also require you to submit additional information about your financial holdings abroad through the FATCA and FBAR forms, which are filed separately from tax returns. Depending on your personal financial situation, you may be required to file FATCA, FBAR, both, or neither. Here is a brief overview to help you figure out what may be required of you.

FBAR

FBAR (Foreign Bank Account Report), is part of a US initiative to prevent American citizens from hiding money abroad. You must file an FBAR if the total aggregate balances of all your UK (and other foreign) bank accounts exceed $10,000 (which is a low base) . Even if your account(s) exceed $10,000 for only one day, you must file an FBAR. Pensions and investments may come into play here too. The FBAR is filed electronically through the BSA e-filing system, which is filed separately than your tax return and is due when you file your taxes.

FATCA

FATCA (Foreign Account Tax Compliance Act), is similar to FBAR in that it is intended to combat tax evasion. It takes a more comprehensive approach by targeting all foreign-owned assets (not just bank accounts). That said, the filing thresholds are much higher--generally only individuals without total  assets above $200 - $300K are required to submit these forms.   Assets covered may include foreign pensions, stockholdings, partnership interests, financial accounts, mutual funds, life insurance policies, etc. but do not include a personal residence in your foreign home. If the combined value of your assets exceeds the threshold, you will need to file Form 8938 with your taxes. You can learn more about the FATCA reporting thresholds from the IRS here.

Capital gains

While you are tax-domiciled in the UK, your UK investment income (including dividends and interest) is subject to tax under the same rules for residents of the U.S. Interest income is subject to tax unless it is from a “qualified obligation of a state, county, city, or municipality” in the United States (these are commonly referred to as “municipal bonds”).

In the U.S., capital gains are taxed at different rates, depending upon the holding period and the nature of the asset. Short-term capital gains (gains on assets that were held 12 months or less) are taxed at normal income tax rates. Long-term capital gains (+12 months) are generally taxed at 15 percent % (although this could be 8% if you have lower levels of taxable income or 20% if you have higher).

Passive Foreign Investment Companies (PFICs)

A PFIC is an investment company registered outside the US whose income is primarily “passive,” ie. generated from dividends, interest, rent, capital gains, etc. Many investment products, such as mutual funds and ETFs, are considered PFICs, so it’s important to watch out for these as you are  deciding how to invest your money in the UK.

The IRS discourages investment in PFICs by levying punitive taxes on any gains, and in most instances similar US-registered funds will be more profitable (and less of a headache!).

State taxes

Depending on the state you lived in before moving to the UK, the length of your international assignment, and the connections you maintain with the state during your absence (e.g. whether you maintain a residence there), you may still be subject to state income tax whilst you are living abroad. Tax law varies greatly from state to state, and it is important to review your own of circumstances with your tax adviser. If you are subject to state income tax, be aware that many states do not allow the FEIE or the FTC that you might qualify for at the federal level (Source: KPMG).

UK Tax Implications

Your residency status in the UK will affect how you are taxed by HMRC on both UK and foreign income. It’s important to first clarify your residency status, which will depend on how many days you spend in the UK during the UK tax year (6th of April - 5th of April the following year) and where you are considered ‘domiciled’ from a tax perspective. Here are the main groups:

Resident

To be “domiciled” in the UK means that you consider the UK to be your permanent home. You are considered a UK resident if either A) you spend 183 or more days in the UK in the tax year and/or B) your only home is in the UK, where you have owned, rented or lived in this residence for at least 91 days, and you spent at least 30 days there in the tax year (Source: https://www.gov.uk/tax-foreign-income/residence).

Non-domiciled Resident

The UK government considers your domicile to normally be the country your father considered his permanent home when you were born. However, your domicile may have changed if you have moved to the UK and do not plan to return to the US (then you would become a domicile resident). These definitions are not necessarily straightforward - the HMRC has four different flow charts to help you determine whether you are domiciled and non-domiciled - and the charts don’t even provide you with conclusive answers (e.g. ‘you are probably domiciled outside of the UK..;). If you are confused about your domicile status, it is best to speak to an advisor.

Deemed Domicile

To make things even more complicated, if you are not a resident of the UK, you can still be ‘deemed domicile’ if either A) you were born in the UK, the UK is your domicile of origin, and you were resident in UK for 2017-2018 or later years or B) you have been UK resident for at least 15 of the past 20 tax years. You can find more guidance about Deemed Domicile status from the HMRC.

Non-resident

You are a non-resident if either: A) you spent fewer than 16 days in the UK (or 46 days if you have not been a UK resident for the last 3 years) and/or B) you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, where no more than 30 days were spent working.

There ar other residency statuses too - secondment, student, temporary assignment, ‘deemed domicile’ etc. Again, best to do some research or get professional help. You can read more about it in HMRC's Statutory Residence Test guidance note or talk to an advisor.

Everyone who earns income in the UK - whether that is earned from work, capital gains,  property - is subject to domestic UK income tax (and allowances). Like the US, many of the UK taxes are progressive, meaning that those with higher incomes pay taxes at a higher rate.

Filing Requirements

Tax is usually deducted automatically from UK wages and pensions - so you will not need to submit a tax return if your income only comes through these means.

You must file  a tax return to the HMRC if:

1. Your income exceeded £100,000
2. You were self-employed as a sole trader and earned more than £1k
3. You were a partner in a business partnership
4. You earned income from renting out a property
5. You earned income from UK-based investments, dividends, savings
6. You have foreign income

The HMRC has this handy tool to find out if you need to send a tax return for the upcoming tax year.

UK Tax on Foreign Income

From a UK perspective, any income from outside the UK (England, Scotland, Wales, and Northern Ireland) is deemed ‘foreign income’. If you have assets and/or investments that you are keeping in the U.S., you need to pay close attention to how the UK treats foreign income. Here’s the lowdown:

Arising basis

If you are a domiciled or a “deemed domiciled” resident in the UK, you pay UK tax on all foreign income on an arising basis, meaning you pay tax on income for the tax year in which it “arose” (was earned). Your income will be taxed regardless of whether it is brought to the UK.

Example: Liz has an investment portfolio in the US, where her financial planner helps her manage her investments. Since Liz is a domiciled resident of the UK and has long term plans to stay in the country, her U.S. investments are liable to UK tax on an arising basis. Given that the US also taxes on worldwide income, Liz is worried she will be double taxed. All is not lost - the UK and US have a double taxation agreement and in both countries where Liz can claim tax credits. It can get complex, but Liz’s money is unlikely to be taxed twice.

Remittance basis

If you are a non-domicile resident, you still pay UK tax on UK income and gains within the tax year that they arise. However, for your foreign income -  you get to choose whether you want to pay tax on an arising or “remittance” basis. Remittance basis means you only pay UK tax on foreign income and gains if you bring (hence the word ‘remitted’) them into the UK. The UK requires you to pay a ‘Remittance Basis Charge’ every year to access this form of taxation - and this charge is £30k! So this would only be worthwhile if you have significant assets and/or investments in the US and you are a non-domicile resident.

Offshore funds and UK Reporting Status

The UK will tax revenues from foreign investments differently depending on whether they are in specific companies versus mutual funds. For foreign mutual funds, you will either be taxed at income tax rates or capital gains rates depending on how these funds report to HMRC.

The UK defines an offshore fund as a mutual fund constituted by a company, often an open-ended investment company (OEIC) or trust resident outside the UK. If a foreign fund meets certain criteria set out by HMRC, it can apply to become a UK reporting fund and they send reports to HMRC to be transparent about the fund’s reportable income. There is a list of funds that have successfully applied for reporting fund status on HMRC’s website, and it’s updated monthly. list (PDF 21KB)

Unless an offshore fund has UK reporting status for the entire period that the investor holds it, any gain will be taxed as income instead of capital gains. This could subject you to significantly higher levels of taxation - the difference will depend on your situation, but this roughly means you will be taxed 20% more. There is therefore likely to be substantial benefit to investing in funds that have UK reporting status.

‘Disposing’ of a Property

If you're resident in the UK, you pay capital gains tax when you ‘dispose’ of your overseas property. 'Disposing of an asset includes: selling it, giving it away as gift/transferring ownership, swapping it for something else, and getting compensation (like insurance payout if it's been lost or destroyed).

If  the property that you are disposing of is on US soil. It's likely you'll also have to pay tax in the US as well. If this is the case, you can claim relief from the HMRC. (source: HMRC).

If you are a non-domicile resident and have selected the ‘remittance’ form of taxation, the rules are different - you can read more about that here.

Rent from foreign property

You pay tax in the 'normal way' on overseas property income - meaning the same way UK property income is treated by the HMRC (you can read more about that here). If you rent out more than one, you can offset losses against income from other foreign properties (source: HMRC).

HMRC Relief for Foreign Tax Paid

How much tax credit relief you get depends on the UK’s Double Taxation Agreement (DTA) with the US. Where the DTA gives exclusive taxing rights to the UK, no foreign tax is payable and there is no relief from the UK. This will all be calculated in your self assessment.

Where the DTA does not prevent a source of income or capital gain being taxed in both countries or there is no DTA, then relief from the HMRC may be available using either of the two methods outlined below: FTCR or deductions.

Foreign Tax Credit Relief (FTCR)

Unlike American tax credits., if you pay more tax in foreign country on an asset, the UK will not give you credit to carry this over.  

Deduction Relief

Instead of using a credit to reduce the tax liability, the foreign tax incurred can be used to reduce the foreign income or capital gains that are chargeable in the UK. You can choose between FTCR or deduction relief, depending on which is most beneficial. Generally, deduction relief will only be preferable where there is no UK tax liability in the year, for example due to losses or the deferral of a capital gain.