DRN-5947736

The complaint Mr G has complained about the advice given by Timothy James and Partners Ltd (‘TJP’) to invest into a Junior ISA (‘JISA’). Mr G has suffered a large US tax liability where there was an alternative that would have reduced tax. Mr G wants to be compensated. What happened Mr G had dual UK and US nationality. In 2013, when Mr G was aged 15 years, his father, Mr G senior, opened a JISA on his behalf which became an ISA when Mr G reached 18 years of age. After Mr G sold shares initially in 2023 and then in 2024, he incurred a US tax liability. He raised his concerns with TJP about the suitability of the advice given. TJP responded not upholding the complaint; • The advice to invest was based on information from Mr G senior. Mr G senior signed the JISA application to confirm Mr G was a UK resident. • Both Mr G’s parents were UK residents and UK domiciled and there was no evidence to indicate TJP was informed that Mr G was born in the US, had any links to US investment or potential tax liabilities. • TJP wasn’t a worldwide tax expert and US tax requirements fell outside of its scope. • It was only when Mr G’s identity was checked to convert from a JISA to an ISA in 2016 TJP became aware of the potential complications, highlighted this on multiple occasions and recommended an accountant who could assist. • Even if it at the outset it had been aware of Mr G’s US citizenship it would still have recommended a JISA as it was appropriate for him as a UK resident and aligned to Mr G’s investment objective of capital growth. Our investigator who considered the complaint didn’t think TJP had done anything wrong; • TJP was a UK regulated adviser who provided UK tax efficient investment advice when Mr G was resident in the UK and eligible for a JISA investment. • It was likely TJP was aware of Mr G’s US citizenship, but it didn’t advertise itself as a foreign tax adviser. • The onus was on the customer to be aware of the tax implications for the country they were a citizen of. Mr G didn’t agree. He couldn’t understand why, if TJP was aware of his US citizenship, there was no responsibility for it to have provided suitable advice. There were alternative investments, so TJP provided unsuitable advice. Mr G requested that his complaint be decided by an ombudsman, so it has been passed to me. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and

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reasonable in the circumstances of this complaint. After doing so, I’ve reached the same conclusion as the investigator and broadly for the same reasons. I’ll explain why. When Mr G senior signed the JISA application for Mr G on 21 March 2013, he confirmed Mr G was ‘resident and ordinarily resident in the United Kingdom’ which was correct. For the purposes of this complaint this was a different question than Mr G senior being asked if Mr G was born in the US and so would be liable for tax on his worldwide gains which would have produced a different answer. However, the application form was for the purposes of opening a JISA in the UK and to do so Mr G needed to be a UK resident as eligibility is based on UK residency under HMRC rules for the purposes of the application itself. Mr G was eligible to open a JISA. But a JISA is not tax free for US citizens and gains and income within a (J)ISA are generally taxable in the US on Passive Foreign Investment Companies (‘PFIC’). A PFIC is a non-US corporation classified by the US’ Inland Revenue Service (‘IRS’) as holding mostly passive assets (50% plus), such as stocks or cash, or generating mostly passive income (75% plus), such as dividends or interest. Common examples include unit and investment trusts ie collective investments which is what Mr G held. PFIC are subject to the Foreign Account Tax Compliance Act (‘FATCA’) which came into force on 30 June 2014 – so this was after Mr G’s JISA was opened – and require US citizens to report and pay tax in the US on overseas investments. It impacted on Mr G as he was born in the US but despite leaving as a young child he’s a so called ‘accidental American’. In TJP’s response to the complaint, it said that it wasn’t aware of the potential tax implications until 2016 when it sought verification of Mr G’s identification and discovered his place of birth. Mr G has said TJP was aware from the outset he was born in the US as the adviser was Mr G’s uncle through marriage to Mr G senior’s sister and so should have been aware of his place of birth. However, the financial adviser is no longer with TJP which means his testimony can’t be sought so his awareness can’t be known for sure. I’ve borne this in mind in my consideration of the complaint but overall, I don’t find that even if the financial adviser was aware of Mr G’s place of birth this changes the outcome to the complaint. I say this because I’ve considered what TJP’s responsibility was as a regulated adviser even if it did have knowledge of Mr G’s citizenship. Most UK regulated financial advisers like TJP don’t provide detailed overseas tax advice as it requires specialist knowledge of foreign tax. And I’m satisfied TJP didn’t present itself as anything other than a UK financial adviser. However, I do accept that UK financial advisers will give consideration to tax when giving advice. In this case the advice given to invest within an ISA tax wrapper – rather than outside of one – was because of the tax advantages. However, the tax element of the advice given to invest into the JISA was incidental to the investment recommendation itself. But, to my mind it doesn’t follow that giving tax advice was TJP’s primary purpose in the relationship and not to the extent that it should have identified Mr G’s investments may have been liable to US tax by dint of his US citizenship. I think that was the responsibility of the investor (or guardian) who had the knowledge of the status of citizenship and should have known the implications of that. When TJP gave Mr G senior contact details in April 2015 of a US tax accountant this looks as though it came about because the previous month he had informed TJP about Mr G having $40,000/$50,000 of cash in the US and so needed specialist advice. But there’s

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nothing to show this was anything other than consideration of the potential implications of holding the cash in the US rather Mr G’s US citizenship. However, it’s evident TJP’s awareness of that changed by 22 March 2018 – which tallies with TJP saying it wasn’t aware of Mr G’s citizenship until 2016 – when it wrote to Mr G to say the citizenship status could lead to restrictions on the investments held. While at that time TJP did suggest Mr G terminate his US citizenship and close any US bank accounts, I don’t think it was presenting TJP itself as a solution to the complications, only that it was aware of them. And I also think that even if Mr G’s uncle was aware of where Mr G was born his expertise was limited to financial advice in the UK and didn’t extend to an understanding of the status of the investments being recommended that might be impacted by PFIC/FATCA. Hence the recommendation of a US tax accountant. To me, it doesn’t follow that if the financial adviser had knowledge of Mr G’s place of birth it placed him under an obligation – within his role as a UK financial adviser – to have an understanding US tax. That onus was initially on Mr G senior – who had lived, and I assume worked/was taxed, for several years in the US – and then Mr G when he came of age. In any event its clear Mr G senior was aware of the need for a US tax return for Mr G by 2019 at the latest as TJP provided a transaction history of Mr G’s ISA since 2013 for ‘US Tax Return Information Request’ which was needed for the US accountant. By 12 May 2023 the implication of Mr G’s dual citizenship was clear. Its recorded he didn’t want to give that up and was considering working in the US at some point. At that time the financial adviser – not Mr G’s uncle who was no longer with TJP – referred to a discussion that had been had about the tax efficiency of the ISA in the UK which didn’t apply to the US and about alternative investments to be fully compliant for tax reporting purposes. But it was known there would be US tax implications if all the funds were sold – which would need to be done within 12 months for a property purchase – so no action was taken. Clearly by this time TJP was aware of the type of investment that could be held within an ISA as the investment recommended was designed for US citizens in the UK and was FATCA compliant as it avoided PFICs. However, I’m not persuaded it follows TJP should have been aware of the need for such a specialist investment at the outset of the relationship. I’m persuaded this knowledge came about as time went on and in particular because of Mr G senior’s use of a US accountant. As a UK financial adviser, I wouldn’t expect for TJP to have had awareness any earlier. However, I do think potentially TJP could have done more sooner if it was aware of Mr G’s US citizenship, but I’m satisfied that any advice TJP gave was limited to UK residents, which Mr G was. And the fact that TJP says the tax complications only came to light in 2016 – after which TJP recommended a specialist accountant – confirms that it didn’t have the scope to give such advice in any event which I find logical bearing in mind its primary role in the relationship was limited to that of investment adviser in the UK. For me to uphold this complaint I’d have to be satisfied that the situation Mr G finds himself in is due to some failing on TJP’s part. And I’m not persuaded it was. I’m not convinced TJP ought to have realised sooner than it did the impact the (J)ISA investments would have had on Mr G’s US tax position because he was born in the US. And once it was aware of Mr G’s citizenship and the implications of that, I think the steps it took have been proportionate. Overall, I don’t uphold Mr G’s complaint. While the (J)ISA may not have been tax efficient in the US, the advice to invest met Mr G’s investment objective of capital growth. I appreciate Mr G will be disappointed in the outcome. It’s clear he understandably feels strongly about it

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and I’d like to thank him for the time and effort he has spent in bringing it. But I hope I have been able to explain how and why I have reached my decision. My final decision For the reasons given, I don’t uphold Mr G’s complaint about Timothy James & Partners Limited. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr G to accept or reject my decision before 13 May 2026. Catherine Langley Ombudsman

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