American citizens living in the UK often don't consider the US Internal Revenue Service (IRS) as a pressing concern. However, a specific group of UK businesses may unknowingly carry genuine US federal tax exposure: American citizens directing or founding UK companies, and UK businesses expanding across the Atlantic.
This isn't a piece for every reader, but rather for those who fit into one of these two categories, or who are about to. For those who already have IRS debt, multiple years of unfiled returns, or an active enforcement issue, seeking attorney-led resolution is crucial.
The US taxes citizens on worldwide income based on citizenship, not residence. This means that someone who moved to London a decade ago, built a UK company, and has been paying UK tax through PAYE or Self Assessment the whole time can still have an outstanding US federal filing obligation running in parallel.
UK companies expanding into the US can also trigger separate US federal filing requirements, including obligations that exist independently of UK Corporation Tax. Furthermore, even well-advised individuals may fall into the 'tax-free' ISA trap, where dividends, interest, and capital gains generated inside an ISA remain reportable on a US tax return, potentially triggering punitive tax treatment.
On top of tax obligations, reporting requirements must also be met. FBAR (FinCEN Form 114) applies once the combined balance of foreign accounts exceeds $10,000 at any point in the year, while FATCA (Form 8938) applies at higher thresholds. Missing either form can trigger real penalties, even if no US tax is actually owed.
However, the reassuring part is that because UK tax rates are often higher than equivalent US rates, most Americans in the UK end up owing little or nothing to the IRS once the Foreign Tax Credit or Foreign Earned Income Exclusion is applied.
When selecting a US tax attorney, look for attorney-led representation, a track record specifically with unfiled returns and debt resolution, multi-state US licensing, and honesty about scope. A free consultation to assess exposure is also essential.
J. David Tax Law leads the list for resolving IRS debt and unfiled returns. The firm brings four decades of combined attorney experience, an A+ Better Business Bureau rating, and over 500 five-star reviews. They operate across 20 physical offices and have a clear entry point for anyone who's just realised their filing situation needs sorting out.
Universal Tax Professionals specialises in annual compliance filing for Americans living in the UK, including FBAR filing, FATCA reporting, and foreign income disclosure. If your situation is current, this is a better starting point than a debt-resolution firm.
Taxes for Expats focuses on coordinating UK and US filing together, ensuring consistent figures and properly claimed Foreign Tax Credits. Expat Tax Online works with clients using the IRS Streamlined Filing Compliance Procedures, designed for taxpayers whose failure to file was non-willful. Flamingo Compliance leans into the detail of UK pensions and investment reporting, which often trips up even well-prepared Americans in Britain.
The IRS's Streamlined Filing Compliance Procedures exist for non-willful cases, allowing expats to become fully compliant while avoiding severe penalties. Addressing the situation before the IRS makes contact generally produces a better outcome than waiting to be found. Catching up frequently costs far less in actual tax than people assume, as UK tax paid can often offset US tax owed via the Foreign Tax Credit.
Frequently Asked Questions reveal that Americans in the UK must file, regardless of residence, and that the US taxes citizens on worldwide income. If you haven't filed US tax returns in several years, this is often fixable, particularly if the failure to file was non-willful. Your UK ISA needs to be reported to the IRS, and setting up a US subsidiary can create a personal tax obligation for you, depending on your role and involvement.
Requesting a free consultation to assess your exposure and lay out a resolution path is the first step in getting ahead of US tax exposure before it becomes a debt.
