What counts as a specified foreign financial asset

What does Form 8938 mean by a financial account

A depository or custodial account maintained by a foreign financial institution, plus certain equity or debt interests in that institution and cash value insurance or annuity contracts. For a UK resident, that means current and savings accounts, ISAs, share dealing and platform accounts, and most investment-type policies held with UK banks, building societies, platforms and insurers.

A foreign financial institution, in the instructions, is broadly an entity that accepts deposits in the ordinary course of business, holds financial assets for others as a substantial part of its business, or is engaged mainly in investing or trading in securities. A UK bank, building society, investment platform or life company fits that description. The account is the asset you report. The shares or funds held inside it are not listed separately, though some of them raise questions on other forms.

Where the account sits matters more than its currency. The IRS comparison of Form 8938 and FBAR requirements (opens the official IRS page in a new tab) says an account at a US branch of a foreign institution is not reported on Form 8938, and nor is an account at a foreign branch of a US institution. Both sit outside the Form 8938 definition, although the second is still reportable on the FBAR. An account with a UK-incorporated bank in the UK is squarely inside it.

Which foreign assets held outside an account are caught

Foreign assets held for investment and not held in a financial account. The instructions give foreign stock and securities, interests in foreign partnerships, notes and bonds issued by a foreign person, interests in foreign trusts and estates, and swaps, options and other contracts with a foreign issuer or counterparty. Stock is never treated as used in a trade or business.

The phrase that does the work is outside an account. Shares in a UK company that sit on the company's register in your own name, or are held as paper certificates, are reported one by one. The same shares held on a UK platform are covered by reporting the platform account. The same shares held through a US brokerage account are not reported at all, because the IRS treats an account maintained by a US financial institution as outside the definition.

The instructions also reach an interest in a foreign pension or deferred compensation plan and an interest in a foreign estate. The IRS summary of FATCA reporting (opens the official IRS page in a new tab) adds that a beneficial interest in a foreign trust or estate counts only where you know, or have reason to know, of it, and that receiving a distribution means you are treated as knowing.

• Shares in a UK private company held in your own name, including a founder's shares in their own business
• Shares in a former UK employer held as certificates or directly on the register
• A member's interest in a UK limited liability partnership or a limited partnership
• An interest in a foreign private equity or hedge fund held outside an account
• A loan note or bond issued by a UK company and held directly

What is left out of Form 8938 altogether

Real estate held directly, foreign currency held directly, precious metals held directly and personal property such as art, jewellery and cars. Social security type benefits from a foreign government are also excluded. None of these is a specified foreign financial asset, so none of them is listed or counted towards the threshold.

A UK home or buy-to-let flat in your own name is therefore outside the form. The rent it produces lands in a bank account, and that account is reportable. The answer changes when property is held through an entity. The comparison table says the entity is itself a specified foreign financial asset, and its maximum value includes the property, so a flat held in a UK company brings the company shares into the total.

Pounds and euros kept at home or in a safe deposit box are left out too, because foreign currency held directly is not covered and a safe deposit box is not a financial account. The same currency in a bank account is reportable as part of the account. Gold certificates issued by a foreign person can be reportable, although the metal held directly is not.

How do ISAs, UK pensions and Premium Bonds fit the definition

An ISA is a financial account with a UK institution and is reportable. An interest in a UK pension is reportable as an interest in a foreign pension plan. Premium Bonds are generally reported. The UK State Pension is a social security type benefit and is left out.

The UK tax treatment of an Individual Savings Account (opens the official GOV.UK page in a new tab) has no bearing on Form 8938. A cash ISA, a stocks and shares ISA and a Lifetime ISA are each an account, reported at its maximum value. The funds inside a stocks and shares ISA are covered by reporting the account, but each fund that is a passive foreign investment company may need its own Form 8621, which our PFIC reporting service handles.

For pensions, the instructions say to report the interest in Part VI and not to list the plan's investments. A defined contribution pot or SIPP is valued at the fair market value of the member's interest. A defined benefit scheme with no known value is taken at the distributions received in the year, or zero if there were none, but it is still listed. Our post on whether a UK pension is reportable on the FBAR covers each scheme type, and our US and UK pensions service covers how they are taxed.

Premium Bonds are held in an account with National Savings and Investments. The IRS has not named them in its guidance, so the cautious practice, which we follow, is to include them at their holding value, as our post on Premium Bonds, Junior ISAs and the IRS explains.

• Cash ISA, stocks and shares ISA, Lifetime ISA: reported as accounts
• Defined contribution workplace pension or SIPP: reported as a pension interest
• Defined benefit scheme: reported, at a value that may be zero
• Premium Bonds and other NS&I products: generally reported
• UK State Pension entitlement: not reported

Do assets reported on other forms still count

Yes. An asset reported on a timely filed Form 3520, 5471, 8621 or 8865 for the same year need not be described again on Form 8938, but a specified individual still counts it towards the threshold. You list how many of each form you filed in Part IV, and if every asset is excepted you complete only your name, taxpayer identification number and Part IV.

The exception follows the asset to the form that already describes it. A US shareholder who files Form 5471 (opens the official IRS page in a new tab) for a UK company does not repeat the shares on Form 8938. A member of a UK LLP who files Form 8865 (opens the official IRS page in a new tab) does the same, as our post on members of a UK LLP explains. A beneficiary or owner of a foreign trust reporting on Form 3520 (opens the official IRS page in a new tab) follows the trust rules in the instructions.

Form 8621 helps less than it seems for most UK investors. Funds inside an ISA or platform account are already covered by reporting the account, so the exception adds nothing there. It matters for a fund or company held directly outside any account and reported on Form 8621 (opens the official IRS page in a new tab). In every case the value still goes into the total that decides whether Form 8938 is due.

How the total is measured for someone living abroad

Add the values of every specified foreign financial asset in which you have an interest, at the year end and at the highest point in the year. A US person living abroad and not filing jointly files when the total exceeds $200,000 at year end or $300,000 at any time. For joint filers abroad the figure is $400,000 at year end or $600,000 at any time.

Living abroad has a specific meaning. A US citizen needs a tax home in a foreign country and either bona fide residence abroad for a full tax year or presence abroad for at least 330 full days in a twelve-month period ending in the tax year. The IRS tool Do I need to file Form 8938 (opens the official IRS page in a new tab) walks through the tests. You have an interest in an asset if its income, gains or proceeds would be reported on your return.

Joint ownership follows a rule that catches many couples in Britain. Where both spouses are specified individuals and file separately, each counts half of a jointly owned asset towards the threshold. Where the other owner is a British spouse who is not a specified individual, the US spouse counts the whole asset. On the form itself, each filer reports the full maximum value.

Take a US citizen employed in Edinburgh who files separately from her British husband. She has a joint current account, a stocks and shares ISA, a workplace pension, certificated shares from a former UK employer, Premium Bonds, a flat in her own name and some euros left from holidays. Her total includes the joint account in full, the ISA, the pension interest, the shares and the bonds. The flat and the euros stay out. Our foreign income and FBAR reporting service prepares Form 8938 from one schedule of these assets, and the guide to FBAR and FATCA for UK residents covers the rest of the reporting picture.