# Uk eis scheme/irs???



## Evilblues (Apr 11, 2014)

Hi there. I am about to take advantage of the Enterprise Investment scheme in the UK which allows any potential profits from a small investment in certain UK companies to be free of Capital Gains Tax (providing the investment is at least 3 years old). 
I am due for my final green card meeting at the London US embassy in a few weeks, so GC to follow shortly. 
My query is do the IRS recognize a UK investment scheme or will I have to pay them CGT when the time comes? Or else 
Is there an American equivalent to the EIS scheme I should make my investment under once my green card is issued?
Thanks in advance.


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## BBCWatcher (Dec 28, 2012)

Only if the U.S.-U.K. tax treaty recognizes it as something special. My guess is not.

Oversimplifying only slightly, the U.S. income tax system generally wants you to report as income your unrealized gains annually on foreign investments. So you might not actually get to wait until the gains are realized, and (if so) the whole investment is questionable. It's certainly something to check.


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## Bevdeforges (Nov 16, 2007)

Not exciting reading, but here are the treaty documents: United Kingdom (UK) - Tax Treaty Documents I'd stick to the Technical Explanations to start with.

But for investments, you're probably going to have to report them like they were regular old US investments. Depends a bit on the nature of the plan you're getting into. (I.e. owning stock in companies vs. making a more active type of investment.)
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

It doesn't matter much, though, Bev. Mix the words "foreign" and "investment" and it's very easy to fall into PFICs. Very, very easy.

So read up on PFICs and see what you think. I stay far away, but your mileage may vary.


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## Evilblues (Apr 11, 2014)

thanks guys - seems to be a bit of a minefield. Not they I would ever condone such conduct but what are the chances of the IRS finding out about a small pre existing investment in the Uk???!


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## Bevdeforges (Nov 16, 2007)

Evilblues said:


> thanks guys - seems to be a bit of a minefield. Not they I would ever condone such conduct but what are the chances of the IRS finding out about a small pre existing investment in the Uk???!


It really depends. Depends on things like your income bracket, the nature of other items on your tax return, how and where the investment is held (i.e. does the holder have an obligation to report to the IRS regarding "US persons"?), the nature of the investment itself and a whole host of other things.

A small-ish investment for someone in a modest income bracket, with no "funny stuff" (i.e. complicated or tricky items) on their tax returns, and chances are they'd never find out - or would at least give you a chance to settle before whacking on big penalties and fees. OTOH, if anything "funny" comes to light on your US tax returns, it could become an opening to question everything. 
Cheers,
Bev


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## Evilblues (Apr 11, 2014)

Thanks Bev. 
My income situation is that I'm self employed and my income comes from both the US & the UK (film business) so I use and will always use a uk accountant to do my tax return then I will simply fill in the relevant IRS return declaring said income and that I have already paid tax in the UK on it. 
With this in mind - What's your opinion on how scrupulous the IRS might be when It comes to keeping UK investments under the radar?
TIA.


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## twostep (Apr 3, 2008)

Evilblues said:


> Thanks Bev.
> My income situation is that I'm self employed and my income comes from both the US & the UK (film business) so I use and will always use a uk accountant to do my tax return then I will simply fill in the relevant IRS return declaring said income and that I have already paid tax in the UK on it.
> With this in mind - *What's your opinion on how scrupulous the IRS might be when It comes to keeping UK investments under the radar?*
> TIA.


Form N400 Section 11


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## Evilblues (Apr 11, 2014)

Ok twostep - thanks for the steer.


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