James Hambro & Partners, the London-based wealth management boutique spun off in 2010 from the JO Hambro Capital Management group, has launched a new investment service for what it says are the "tens of thousands of Americans and their families living in Britain [who are] caught between tax regimes on both sides of the Atlantic."
JH&P, as the company is also known, unveiled the business on Monday, which coincided with this year's deadline for Americans resident overseas to file their U.S. tax returns.
The new business comes a little less than three years after JH&P unveiled a new U.S. Securities & Exchange Commission-regulated operation that it said was targeted at “homeland” Americans rather than expats. Prior to this, like most British wealth managers, JH&P’s business hadn't generally accepted Americans as clients, who are often shunned by non-American focused wealth managers because of the significant additional regulatory burden that the US regulators have been imposing in recent years on those who advise Americans.
In a statement, JH&P investment manager and partner Rosie Bullard, pictured left, noted that the U.S. was one of just two countries in the world that tax on the basis of citizenship rather than residency, the other being Eritrea.
As a result of this citizenship-based tax regime, she added, "Americans living in Britain have to pay two sets of taxes – to HMRC and the IRS – and often suffer the harshest elements of both regimes."
"They can often offset taxes paid to HMRC against their IRS bill, but if a U.K. tax rate is lower than the American equivalent, they will probably have to make up the difference. The IRS may not recognise British tax wrappers, like ISAs, too. So working out how much to pay can be incredibly difficult.”
JH&P says its new service for American expats in the U.K. is designed to addressing such problems. To avoid breaching the so-called PFIC (passive foreign investment company) rules, which can hit non-U.S.-resident American investors with punitive tax rates on income, it shuns investment funds, and invests its Americans instead "in high-quality individual companies".
Reporting, meanwhile, is also designed to address the requirements of both tax authorities.
Bullard says: “We’ll help build portfolios that are diverse and appropriate to the risk profile of the investor, and we’ll work with their advisers to give them the necessary information in reports.
"Hopefully, this will remove a lot of the pain of completing next year’s tax returns.
"Sadly, we cannot remove the pain of actually paying the [tax] bills.”
JH&P cites Office for National Statistics data that indicates that around 139,000 Americans live in the U.K. However, JH&P points out, the IRS reporting rules can also cover the non-American spouses and relatives of U.K.-resident Americans if assets are shared, suggesting that "many more" than 139,000 may be affected by the U.S. tax problems.
News of the new JH&P investment service comes less than two weeks after reports that another major U.S. wealth manager, Seven Investment Management, officially unveiled what it called a "super-compliant investment product" designed specifically for American expatriates living in the U.K.