British citizens born in America face having bank accounts frozen

Pedro Gonçalves
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British citizens born in America face having bank accounts frozen

Tens of thousands of British citizens born in the US but only lived there for a few months or years face having their bank accounts frozen as part of a crackdown by the US tax authorities.   

The Internal Revenue Service (IRS) is ordering British banks to hand over the American tax identification numbers of dual nationals so they can be charged tax as overseas citizens. This leaves many so-called 'Accidental Americans' in a complex situation, because they were never given US tax number or told they would be liable to US taxes for the rest of their lives. 

With the exception of Eritrea, the US is the only country in the world that taxes non-resident citizens on their global income. British banks face huge fines from US regulators if they continue to serve US citizens but fail to share information with the US Internal Revenue Service.

In one case, a 74-year-old living in Cambridge who had assumed her US citizenship had lapsed was bombarded with letters from Barclays demanding her US tax identification number. She left the US in 1947 at the tender age of 18 months old.

The pensioner, who assumed her citizenship would have expired, told The Guardian: "I felt hounded … I didn't understand US tax law."

The 74-year-old revealed she spent £11,300 of her retirement money to enlist the services of a specialist accountant who helped her obtain a social security number, file five years of back taxes and declare all her assets.

The tax plight has affected thousands of so-called accidental Americans, born in the US but taken out of the country at infancy.

Those who were born before 1986 never received a tax identification or social security number. Neither had they been warned of being liable for US taxes for the rest of their lives.

Distraught citizens in the UK have been reaching out to prime minister Boris Johnson, who had personal a experience of dealing with the US tax authority in 2014, in search of a way out of the conundrum.

Johnson, who was born in New York but left at the age of five, rejected American citizenship after what he branded an "absolutely outrageous" move by the US to tax him on the sale of his home in Islington, north London.

Many Belgians born in the US are also running into banking problems because of their status as "accidental Americans". 

Some banks responded early to the IRS demands by simply closing their American customers accounts, with  Deutsche Bank being one example with branches in Belgium.

"The goal of FATCA was to prevent American citizens from committing tax fraud by hiding accounts overseas," Francis Adyns of Belgium's federal finance agency told VRT. Belgium's approach to FATCA is to have banks request needed information from Americans with accounts. They report that information to the federal government, "and the government then sends it through an automated system to US tax authorities," he explained.]

Belgian banks must be able to report all the information required by 31 December or close the accounts of those involved. "We are required to do this by law, we can't get around it," said Isabelle Marchand of the financial sector federation Febelfin. "If the customers cannot submit the necessary information, than the banks must shut down their accounts."

According to the country's statistics bureau, there are 10,793 Americans currently living in Belgium. But that does not include those with dual nationality or accidental Americans. The number of those Belgians is not known.

Giving up American citizenship requires being tax compliant for at least five years and paying a fee of €2,125.

 

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