It will look to help US expats handle the burden of filing tax returns, both in the UK with HM Revenue and Customs (HMRC) and in the US with the Inland Revenue Service (IRS).
The firm works with clients with a minimum of £1m ($1.25m, $1.12m) in investible assets.
JH&P investment manager and partner Rosie Bullard said: “Only two countries in the world tax non-resident citizens on income earned overseas – one is the US, the other is Eritrea.
“Americans living in Britain have to pay two sets of taxes – to HMRC and the IRS – and often suffer the harshest elements of both regimes.
“They can often offset taxes paid to HMRC against their IRS bill, but if a UK tax rate is lower than the American equivalent, they will probably have to make up the difference.
“The IRS may not recognise British tax wrappers like ISAs too. So, working out how much to pay can be incredibly difficult.”
Tax and investment issues
An even more complicated factor for US expats is that each tax authority has different demands for reporting, as the US operates on the calendar year, rather than April to April like in the UK.
The IRS also requires all transactions during the year to be captured in dollar equivalents, and its accounting methodology for calculating capital gains tax liabilities differs to HMRC’s.
Furthermore, American expats also must avoid what are known as Passive Foreign Investment Companies (PFICs), which can incur punitive tax rates, and most UK collective investment schemes, such as unit trusts, are classified as PFICs, which severely restricts fund choice.
Investing in US-domiciled funds is rarely an alternative option as many of these do not meet HMRC’s requirements.
Bullard said: “It’s incredibly complicated, and there’s no hiding from the rules. Americans living overseas have to file returns, and non-US institutions that hold accounts for Americans have to report their holdings to the IRS.
“The challenge these Americans face is therefore twofold: investing wisely without the help of funds and reporting on their performance, because few investment managers provide income and capital gains reports that are compliant with both US and UK tax regimes.”
Tackling the problem
To avoid breaching the PFIC rules, the service will eliminate funds, investing instead in “high-quality individual” companies.
The Office for National Statistics (ONS) estimates that around 139,000 Americans live in the UK, but the IRS reporting rules can also cover their non-American spouses and relatives if assets are shared, so many more people are affected by the problem.
“We’ll help build portfolios that are diverse and appropriate to the risk profile of the investor, and we’ll work with their advisers to give them the necessary information in reports,” Bullard added.
“Hopefully, this will remove a lot of the pain of completing next year’s tax returns. Sadly, we cannot remove the pain of actually paying the bills.”
This service comes a few months after Dunhill Financial teamed up with platform provider Praemium to provide investment models that are built solely with US investments and aimed at American expats.