‘Accidental American’ is a term for people who were born stateside, but left as a baby or young child to live their whole lives in another country.

This particular group of people are increasingly falling foul of American taxation laws that still consider them to be an American citizen.

Why are American born British citizens’ bank accounts being frozen?

There have been several cases of American born British citizens having their bank accounts frozen. Why?

If a bank or other financial institution has any American branches, they are obliged to comply with the Internal Revenue Service (IRS). This is the USA’s version of HMRC. This is laid out in the Foreign Account Tax Compliance Act (Fatca) 2010. Any information they hold on British citizens with dual nationality must be reported to HMRC, who will then pass it on to the IRS.

Recently banks have been getting in touch with people asking them for their American social security number or tax identification number. The IRS can then use this information to officially deliver their US tax bill. If this is not forthcoming, their financial accounts are being frozen while the situation is investigated.. This includes exclusively online companies.

But people who left America as infants or children are unlikely to have an identifying number to share. And most are totally unaware that they are breaking any kind of US tax law.

What tax law are they breaking, if they are not making any money in America?

This is the question they are asking. America taxes all its citizens’ global earnings, whether they are made in the US or elsewhere. It also makes no different if they are currently resident, or have never lived, in America. Eritrea is the only other country with such tax legislation.

The idea is that wealthy people cannot hide their money abroad and avoid paying their taxes in America. Although some feel that the efforts of those enforcing the rules are not focused in this direction.

Why is this happening now?

There are large fines for banks and other financial organisations who do not comply with IRS regulations. At the moment there is an amnesty on information that pertains to dual American nationals, which means they can avoid the fine. This stops at the end of 2019, so banks are trying to process all the dual citizens in their records before then.

How many people does this affect?

According to the European Banking Federation, there are 300,000 Accidental Americans in the EU. There isn’t a figure for the UK, but experts estimate that it is somewhere near France’s 40,000 Accidental American citizens.

In 2014, Prime Minister Johnson himself was subject to the law, as he was born in New York. The IRS came looking for their cut of his Islington property sale. At the time he called it “absolutely outrageous” and renounced his US citizenship. People are now asking him to help those Britons who are suffering the same fate now.

Another example, from the Guardian, is a woman who arrived on the RMS Queen Elizabeth in 1947 aged 18 months. She is now 74, had no idea she still had US citizenship and her bank is doggedly trying to get a US tax ID from her.

It cost her £11,300 of professional expertise to properly renounce her US citizenship, find her US tax ID number, declare her assets and file back taxes for the last five years. £11,300 to resolve a situation she didn’t know she was in.

She said, of America’s global earnings tax policy, “It was a big net cast to catch these big fish, these sharks, hiding American money abroad. In fact they haven’t caught very many of those and instead caught little minnows like myself.”

What is the solution?

It is possible to renounce your American citizenship, but this will cost around £2,000. This takes you out of the equation entirely and the IRS will no longer have any right to claim tax on your earnings or assets. If you are in this situation, or know someone who may be, it is wise to seek legal advice. Remember that the banks are on a countdown, so it is best to act sooner than later.