PFIC analysis and Form 8621, for the funds you already hold.
Most UK funds, index trackers and ETFs are Passive Foreign Investment Companies to the IRS, including everything inside a Stocks & Shares ISA. The default tax treatment is punitive, and the reporting is the most technical form in expat filing.
Your ISA is not invisible to the IRS
The ISA wrapper means nothing in US law. Each fund inside it is tested separately, and a fund that is a PFIC drags gains into the excess-distribution regime: taxed at top rates with an interest charge running back through your holding period.
We identify which holdings are PFICs, prepare Form 8621 for each, and where available make the QEF or mark-to-market elections that convert the treatment into something rational.
- Holding-by-holding PFIC determination
- Form 8621 preparation for each reportable fund
- QEF and mark-to-market elections where beneficial
When you sell, the return has to show it
When a PFIC is sold, the gain does not simply sit on a capital gains schedule. It is spread back across every year you held it, taxed at the top rate for each, with an interest charge on top. We prepare the Form 8621 disposal reporting and calculate the excess distribution correctly, so the sale is reported once and properly.
US-UK double taxation and the treaty
How the treaty, foreign tax credits and the earned income exclusion stop the same income being taxed twice.
Questions we are asked most
The ones that come up in almost every first conversation about pfic reporting.
A separate Form 8621 for each fund, for each year you hold it, once your total PFIC holdings pass the de minimis exception - $25,000, or $50,000 filing jointly, with no distribution or disposal in the year.
Somebody holding a modest portfolio of a dozen funds can generate more forms than their entire tax return would otherwise need.
The default regime still applies to the disposal, and the interest charge is calculated across the whole holding period.
Selling in a rush is not always the right answer - it can crystallise the worst treatment rather than avoid it.
They are outside the PFIC regime, which removes the US problem. But if you are UK resident, HMRC reporting fund status becomes the question instead.
The workable answer is usually a fund recognised by both systems, not one optimised for either.
The ISA wrapper itself is not, but what sits inside it usually is. Unit trusts, OEICs and investment trusts are almost all PFICs under US rules.
The wrapper also gives you nothing on the US side - the IRS does not recognise it, so income and gains inside are taxable to you as they arise.
The default regime taxes gains at the highest ordinary rate and adds an interest charge as if the gain had built up evenly over the years you held it.
The reporting burden is also disproportionate once you are past the de minimis exception: a separate form per fund, per year.
Often, yes. A mark-to-market election taxes the annual movement instead and removes the interest charge, which is usually far better.
The catch is timing. Elections generally have to be made in the right year, which is why this is worth looking at before a holding has grown for a decade.
Yes. It means choosing the account type and the funds inside it with both systems in view, rather than discovering the problem at filing.
Equivalent exposure held through US-domiciled funds or direct holdings often sidesteps PFIC treatment entirely.
Related services
Most positions touch more than one of these. We prepare them from the same file.
Holding UK funds as a US person?
We will work out the exposure, whether an election improves it, and what a portfolio both systems leave alone would look like.