Investing in the United Kingdom as a U.S. Citizen – Opportunities and Pitfalls

 

There are more opportunities than ever for American companies to invest in the United Kingdom. There is increased interest among American companies to expand their offers in the UK as Brexit and the pandemic has led to many shifts that present opportunities.

 

Given the shared cultural background, expanding to the United Kingdom is a natural move for entities in the United States. Currently, the United Kingdom is the second largest recipient of U.S. investments in the world with 12% of all foreign direct investments ending up in the UK. Over 1,5 million people in Britain are currently employed by the 7,500 American companies and their subsidiaries that have operations in the UK and the trend is set to grow.

 

Some sectors were hit particularly hard and that presents opportunities as more businesses are for sale in the UK than before.

 

While the recent shifts in global events make conducting business more difficult, increased digitization and the shift to remote working can also be an advantage for flexible companies to act faster to seize opportunities.

 

If before the pandemic, signing of important documents had to be done in front of a public notary, now more states than ever recognize electronic notarization as valid. The rise of video conferencing tools such as Zoom or Google Meet has made conducting business abroad easier.

 

While moving to the UK from the USA has not been simplified, the process is not very difficult if you are either skilled or you are investing. However, to avoid any hassle, it is best to contact a lawyer or agency that can guide you through the process.

 

Another pitfall most businesses do not give enough consideration is the GBP-USD exchange rate. One year ago 1 pound bought 1.23 dollars while today 1 pound is equivalent to 1,39 dollars. That is a big shift and it is hard to predict what the future holds. But overall expenses for U.S. companies in the UK grew considerably and in the volatile market of today, it is important to plan to have some buffer in this area.

 

Another important consideration are taxes, and we are not talking only about company taxes as they are pretty straightforward but individual income tax. The United States along with Eritrea are one of the two countries in the world that collect taxes based on citizenship rather than residency.

That means that a U.S. individual will pay taxes both in the United States and in the host country where they are residents. There are exceptions to this, for instance the Foreign Earned Income Exclusion lets expats exclude income from being taxed in the USA. Currently the maximum limit for exclusions is 109,000 USD a year.

Anything above that will be taxed in two countries so it is best to consult an expat tax consultant that has experience dealing with U.S. citizens in the UK.

 

You will also need to file with the IRS the FBAR (Foreign Bank Account Report) if at any point during the year you had over $10,000 in any bank account.

 

Despite these difficulties and risks involved, investing in the United Kingdom is an attractive proposition for U.S. individuals and companies as a massive rebound of the economy is expected soon.