Fears of Trump tax clampdown
Surge in the number of American expats declaring previously undisclosed foreign assets to US tax authorities. Rush to own up is driven by fears that an Obama era amnesty could end. Combination of fear and generous amnesty is “perfect carrot and stick” for Washington, analysis by Bambridge Accountants concludes. Comment from Alistair Bambridge, Senior Partner at Bambridge Accountants.
The number of American expats owning up to US tax authorities under an Obama-era amnesty has surged in 2017, according to figures released by the chartered accountants Bambridge Accountants. The firm, which specialises in handling the tax affairs of US citizens living in Britain, has seen a four-fold year-on-year increase in the number of Americans declaring their UK assets to Washington for the first time. The USA is one of only two countries in the world to make its citizens file an annual tax return wherever they are in the world. In 2012 the Obama administration introduced a generous amnesty to encourage expats who had failed to do so to come forward.
The Streamlined Filing Process, as it is known, allows American expats – even those who have lived abroad undeclared for many years – to get right with the US tax authorities with no penalties. In return for declaring their foreign income and assets for the past three years (previous tax years can be ignored) and paying any US tax they owe, an expat completing the process is exempted from prosecution.
Though the Trump administration has yet to make any official announcement on the policy, it is widely expected that the amnesty could be curtailed or even ended. UK banks are now obliged to notify US authorities of assets held by American customers, and in February it emerged that America’s Internal Revenue Service has been granted the authority to cancel the passports of expats who owe more than $50,000 in US tax.
Alistair Bambridge, senior partner at Bambridge Accountants, explains: “Despite the generosity of the amnesty it offers, for years the uptake of the Streamlined Filing Process among Britain’s 200,000 US expats was relatively modest. Yet in the first three months of 2017 we handled an average of four applications a day from UK-based Americans keen to use it to settle up with the US tax authorities. By contrast, in the first quarter of 2016 we saw an average of just one a day. The amnesty is only available to Americans who voluntarily contact the IRS to declare their foreign earnings and assets. Those who wait for the US tax authorities to come knocking could face a large fine in addition to any tax bill.
“Despite Uncle Sam’s famously long reach, it’s thought there could be thousands of Americans living quite legally in the UK and paying UK tax, but who are below the radar of US tax authorities. The growing sense that the net could be closing in on them – and the fear that the amnesty for those who do own up could be withdrawn – is proving a perfect combination of carrot and stick.”