Thousands of Brits who were born in America but left as children risk having their UK bank accounts frozen as the US authorities wage a global campaign to tax expats.
The root of the problem is the US Foreign Account Tax Compliance Act, commonly called FATCA.
The law was introduced by former President Barack Obama to catch US citizens hiding their wealth out of the reach of the Internal Revenue Service (IRS).
The IRs says more than $10 billion of previously ‘lost’ tax has been clawed back since the start of FATCA.
FATCA starts to bite
FATCA demands any financial institution with accounts controlled by American customers should report personal information about the account to the IRS for cross checking against tax returns.
The banks must identify and report their American clients – including those with dual nationality who may not have stepped foot in the States for decades.
Unfortunately, thousands of these ‘accidental Americans’ are not aware of FATCA and their liability to register as taxpayers with the IRS, so they have no US tax identification number to offer their bank to tie up with their details for the IRS.
But their banks face fines and even banishment from trading in the US if they fail to make the reports, so insist accidental Americans give them the information or risk their accounts being frozen.
Boris Johnson caught in tax net
The European Parliament reckons around 500,000 accidental Americans live in Europe, with around 40,000 in Britain.
Banks and other financial institutions have to the end of the year to identify any customers coming under FATCA rules who could be liable to pay taxes in the US.
America is the only major developed nation to tax citizens on their global income regardless of where they live in the world.
Even British Prime Minister Boris Johnson fell foul of FATCA when the IRS chased him for a slice of the capital gain he made when selling a home in London. Johnson was born in the USA but has lived in Britain since he was five years old.
Recently Labour MP Preet Kaur Gill asked Johnson to step in for a voter caught by FATCA who was born in the States but left aged 10 weeks old but is expected to file a tax return with the IRS.
