UK digital wealth management company Nutmeg has withdrawn its services to US tax residents, according to British newspaper Mail on Sunday.
The US is one of two countries in the world together with Eritrea to have a citizenship-based taxation model, meaning that US citizens have to pay tax in the States regardless of whether they reside in the country.
This includes people who were born in the United States but have never lived there or people with parents who are US citizens.
In July 2021, customers of Nutmeg who are US citizens/tax residents have been sent emails to inform them that their accounts will be closed, the British newspaper said.
It also said that the digital wealth firm is withdrawing from providing Isas, pensions and investment accounts to around 350 people due to “legal and regulatory complexities”.
The US’ Foreign Accounts Tax Compliance Act (Fatca) is part of those complexities, as it requires US citizens and their foreign financial institutions to report information to the Internal Revenue Service (IRS) for tax purposes.
Classification
In 2018, Nutmeg stopped accepting US tax residents as new clients but continued servicing its existing ones.
International Adviser contacted Nutmeg for comment but the firm did not reply.
In its Frequently Asked Questions (FAQ) page on its website, however, the firm said: “Due to the comprehensive reporting requirements imposed by the IRS through Fatca, Nutmeg has made the decision to not accept further US persons as customers.
“For purposes of Fatca classification, customers considered by the IRS as US persons include: all US citizens; permanent legal residents or ‘green card’ holders; and persons born in the US.
“This also includes dual nationals where one of the nationalities is the United States.”
Potential reform
In other news, global business advisory firm KPMG is rolling out a tax practice in London to support US expats in the UK and across Europe as “the potential for US tax reform accelerates”, it said.
The team will be led by Linus Ostberg, who joins as director of the US tax practice part of KPMG UK’s family office and private client team.
He was previously a director at Moore Global US Tax Services, following several years as a senior tax manager at Deloitte US.
The practice, which the accountancy giant plant to scale up rapidly in 2022, will focus on advising high net worth and ultra-high net worth individuals and families with US tax obligations.
“President Biden is introducing significant changes to the US tax system, so there has never been a greater need for tax guidance for the UK’s American community,” said Greg Limb, KPMG UK partner and global head of KPMG’s family office & private client practice.
“Establishing a dedicated practice in London has become critical to meeting the demand from American citizens who need to ensure they comply with the ever-changing tax laws. We’re capitalising on a growing market demand that will likely pick up additional steam as the US presses forward on reforming its tax code. Adding a specialist US tax practice in London is both a logical and a strategic step for our firm.”
Ostberg added: “This is the right move at the right time for our firm. We’re going to actively recruit over the next year to quickly scale the team and further bolster the suite of services that we offer to our clients.”
