Margaret had been living in the UK for over 30 years, but maintained her US citizenship. Around 2005, she had opened an Fidelity UK investment wrapper in the UK, an ISA on Fidelity’s platform, via a UK-based adviser. More recently, the portfolio was moved into a unitised Model Portfolio Service (MPS) and was taken over by a specific Discretionary Fund Manager (DFM). Fast forward to 2025. Margaret received a stark communication from Fidelity to the effect that, due to her US citizenship status, she could not continue to hold the ISA with Fidelity as they did not allow US Person’s and Fidelity was going to force the account to be liquidated in full, with the proceeds paid out as cash. For Margaret, this created a significant problem. A forced sale would cause huge taxable capital gains in the US, despite sitting in the UK’s ISA tax shelter.
This solution, created years ago by a previous financial adviser, made sense at the time: “professional management”, tax efficiency (from a UK perspective) and “set and forget”. But the previous adviser was not knowledgeable on US UK taxation and in their advice, they caveated “as a US Person you should seek independent professional advice”.
Due to various policy and regulatory changes with platforms, regulators and from a US tax perspective, issues emerged in 2014 when FATCA came into force and non-US investment platform amended their terms of business to not accept US Persons. This status for Margarette was not picked up until 2025 and Fidelity then wrote outlining its position that had been in force for 11 years at that point. For Margaret, this letter of a forced sale created a significant problem. A forced sale would cause huge taxable capital gains in the US, despite sitting in the UK’s ISA tax shelter. The ISA had been built up over a period of more than two decades and selling everything in one fell swoop would crystallise gains at a hugely inopportune point. Furthermore, the underlying investments were locked into a restricted MPS proposition. Due to the underlying holdings, they could not be moved “in-specie” directly to another platform.
Margaret sought out Edale after a search for a specialist firm with US-UK cross-border investment and tax expertise.
The Problem
The case had multiple layers of complexity:
- US Tax Exposure: ISAs are not recognised as tax-free for US persons by the IRS. A forced liquidation would crystallise a large US capital gains tax liability on the entire sale, likely catapulting Margaret into a much higher tax bracket for that year.
- Restricted MPS Holdings: The portfolio was held within a highly exclusive DFM “Model Portfolio Service”. This meant the underlying holdings were:
- Limited in “in-specie” portability, i.e. they could not be easily moved without selling.
- Contractually bound to an integrated advisory/platform relationship.
- Rarely supported on alternative platforms due to underlying fund restrictions.
- Platform Restrictions on US Persons: Fidelity had a changed policy position for US citizens and no longer wished to continue the account as-is.
Time Pressure
Fidelity had set a deadline before the forced sale would be executed by the platform. This meant a solution had to be coordinated within a limited timeframe, to avoid the default, catastrophic option. Fidelity has provided postponements to the forced dealing where they saw an active solution was underway to complete a transfer. Close communication with Fildeity eases some of the time pressure but ultimately is was clear this was the end game if no transfer was completed.
Edale’s Approach
Edale saw this as both a “nuts and bolts” transfer technicality and a cross-border tax risk scenario. Due to the highly customised, restricted nature of the MPS, a vanilla transfer was out of the question and it invovled a more nuanced approach. Find an alternative custodian/platform that could both accept a US citizen and support fully compliant investment options going forward.
Edale liaised directly with:
- Fidelity
- The DFM
- Through the client the UK advisory firm
- Alternative platforms open to taking US citizens
- Our compliance and legal partners
This required extensive coordination across several institutions, all with their own priorities, risk appetites and opinions about US persons.
Eventually a clear advice process was cleared and Eldae were able to provide Margaret with:
- Fully regulated investment and tax advice on the strategy for restructuring the ISA.
- Guidance on how to mitigate exposure to US tax, through timing, phasing and reporting strategy.
- A long-term investment plan and suitable wrappers for a US citizen living in the UK, to avoid future product restrictions.
- While an ongoing PFICS reporting and tax issue, Margaret had a process for reporting and taxes and was happy to continue this work into the future.
The Outcome
Instead of an immediate complete liquidation, Margaret was able to:
- Avoid a forced sale of her entire ISA
- Limit exposure to unexpected, large US capital gains taxes
- Transfer her portfolio to an alternative platform with more stable policy and long-term visibility around accepting US persons
- Migrate restricted mutual funds structure to one she fully understood and had control over
- Continue PFICs reporting and take income from holdings at a schedule and timeline under her control
Why This Case Matters
This case matters because there are lots of UK-resident US citizens with long-standing ISAs and investments from a less restrictive era. Many outdated forms of share classes and walled garden investments become de facto transfer traps. A forced sale is not just an inconvenience: for US citizens, it can be financially catastrophic due to double tax impacts. With specialist advice and coordination, even complex, legacy, restricted structures can often be supported for a transfer.