Interactive Brokers ISA – A New Option?

I saw on Reddit yesterday that Interactive Brokers now offers an ISA. Potentially, this could be exciting news, opening up a new ISA option for Americans in the UK. Why? Because IBKR is both a) generally very low cost and b) friendly to US citizens outside the US. I already have Roth IRAs with IBKR (will write up that experience soon), so consolidating my ISAs there could be interesting.

So I thought I’d do a quick comparison with my current broker and usual recommendation for Americans in the UK, Hargreaves Lansdown. Cutting to the chase: it’s not clear to me yet if IBKR is a better option than HL, but at least it’s good to have other options coming – competition can only help. I can’t do anything until the new UK tax year on 06Apr anyway, so will see how things develop over the coming months before making any changes.

Costs & Fees

IBKR and HL take very different approaches to their fee structures:

  • HL is fairly simple, but can be pretty expensive:
    • Dealing: £11.95 per trade, but purchases can be brought down to £1.50 using the Monthly Savings feature (also tapers down if you have 10+ trades in the previous month, but you probably want to avoid that kind of active trading)
    • Dividend Reinvestment: 1%, with £1 minimum and £10 maximum
    • Platform Fee: 0.45%, capped at £45 per year (assuming you hold individual stocks, which is your only real option as a US taxpayer to avoid PFICs)
    • Currency Conversion: 1% up to £5,000, tapering down to 0.25% for over £20,000
    • Withdrawals: no fee
  • IBKR fees and commissions are generally low, but horrendously complex:
    • IBKR generally offers a Tiered and a Fixed fee option – Tiered is almost always cheaper, but it’s not clear to me if Tiered will be an option for ISAs
    • On Fixed, it’s £3/€3/3 CHF/3 USD for all trades on European exchanges up to £6,000/€6,000/10,000 CHF/$8,000. Trades bigger than that are 0.05%. For US exchanges, it’s at least $1 per trade (or $0.005 per share, if that’s higher, up to a maximum of 1% of trade value).
    • On Tiered, for European exchanges it’s 0.05% of the trade, minimum of £1/€1.25/1.50 CHF/$1.70. For US exchanges, it’s $0.0035 (~1/3 of 1 cent) per share, minimum $0.35, max 1% of the trade value.
    • Dividend Reinvestment: charged the same fees as other transactions. Automatic reinvestment is only available for US and Canadian stocks, other stocks would have to do it manually.
    • Platform Fee: £3 per month minimum activity fee. Either you pay at least £3 in commissions for trades, or you get charged a £3 fee (or the difference, if you have some commissions but less than £3).
    • Currency Conversion: 0.03% – best on the market that I know of
    • Withdrawals: One free per month, £7 after that – should never need to pay this if you plan ahead.

A couple of illustrations:

  • Buy £1,000 of a UK-listed individual stock, like part of a pseudo-indexing portfolio:
    • HL: £1.50 if you plan ahead using Monthly Savings
    • IBKR Fixed: £3
    • IBKR Tiered: £1 (the minimum, since 0.05% of £1,000 is less than £1)
  • Buy £20,000 of a US-listed stock, like if you decide Berkshire Hathaway is close enough to a diversified mutual fund that you put everything there:
    • HL: £11.95 dealing fee (I can’t find any US stocks on the list for Monthly Savings) plus currency conversion fee of £137.50 = total £149.45
    • IBKR Fixed: £20,000 buys you about 85 shares of BRK.B. At $0.005 per share, that’s less than the $1 minimum, so it’s $1. Add 0.03% currency conversion of £6 = total about £6.75
    • IBKR Tiered: At $0.0035 per share, this is just under the $0.35 minimum, plus the same £6 currency conversion = total about £6.26
  • One year of my pseudo-indexing approach of 20 UK stocks purchased in one month, assuming 40 dividend payments a year:
    • HL:
      • Dealing: 19 stocks at £1.50 using Monthly Savings, plus 1 stock at £11.95 to soak up the unused cash = £40.45
      • Platform: £45 a year
      • Dividend Reinvestment: 40 dividends x £1 each = £40 (in practice will be a bit less, since not every dividend will be big enough to buy a full share)
      • Total: £125.25
      • When you eventually sell (far in the future!), it’ll be £11.95 per stock, or maybe a bit less if you have enough transactions to move down the dealing fee table. That’s £239 future cost, although could be spread across many years of contributions.
    • IBKR Fixed:
      • Dealing: 20 stocks at £3 each = £60
      • Platform: £3 per month, one month this is covered by the dealing fees, so 11 months = £33
      • Dividend Reinvestment: 40 reinvestments x £3 each = £120 (also going to be less in practice like HL)
      • Total: = £213
      • Future selling fees: 20 stocks at £3 each = £60
    • IBKR Tiered:
      • Dealing: 20 stocks at £1 each = £20
      • Platform: same as Fixed = £33
      • Dividend Reinvestment: 40 reinvestments x £1 each = £40 (again, going to be a bit less)
      • Total: £93
      • Future selling fees: 20 stocks at £1 each, or maybe a bit more if the value is high enough to exceed the minimums = call it £60 for argument’s sake

In summary, for regular pseudo-indexing in UK stocks, if IBKR Tiered is an option, it’s moderately cheaper than HL (£30ish a year), while Fixed is a bit more due to the higher dealing fees. But if you want non-GBP stocks, IBKR becomes dramatically cheaper, on either Fixed or Tiered, due to the far lower currency conversion fee. Also, if you want to trade actively, instead of using Monthly Savings, the HL dealing fees skyrocket and either IBKR pricing scheme is much cheaper.

It is clear you generally wouldn’t want ISAs at both, or you get stung by both the £45 and £36 platform fees every year, so you need to pick your poison.

Investment Options

IBKR is known for good margin rates and options, but within an ISA they only allow:

  • Shares
  • Securities issued by Companies
  • Recognised UCITS
  • Depository Receipts, American Depository Receipts and American Depository Shares

Due to PFIC and MiFiD/KID rules, that will mean it’s just individual shares for US citizens, same as Hargreaves Lansdown. No difference here that I can see.

Customer Service

This is one I can only describe from other people’s anecdotes, so take with a big grain of salt – I haven’t had to use customer service with either company yet.

HL has a generally good reputation for customer service, being known as a relatively high-fee, high-touch broker. It’s help documentation is generally clear and concise.

IBKR has a generally poor reputation for customer service, as a low-fee broker. They enable some very complicated things (especially outside ISAs), and expect their customers to be knowledgeable about what they’re doing. They have extensive help documentation, but it’s not always that clear. I’ve heard their phone support isn’t all that helpful.

Overall Experience

The experience of each aligns with their customer service. HL is a slick-feeling website and app, nicely laid out, generally pretty intuitive. IBKR’s user interface feels about 20 years old, it’s not always easy to find where to go to do what you want to do, but the capabilities are all there somewhere and it’s quite efficient once you learn it.

I would not recommend IBKR for somebody who is brand new to investing, it’s intimidating at best and possibly an error trap. HL makes it easy for new investors, although US citizens need to be careful because they won’t stop you from doing things that are legal but have horrific US tax consequences.

What Next?

I’ve already used up my 2021-22 ISA allowance, so I can’t do anything right now anyway. But I will be keeping an eye on any user reports on IBKR ISAs, especially to confirm if Tiered pricing is an option. If Tiered is an option, it’s certainly worth thinking about, although whether the hassle of moving existing investments is worth the modest £30 a year savings is an open question – you also buy into a tiny marginal hassle of doing manual dividend reinvestment. There doesn’t appear to be any fee with HL or IBKR for a transfer of stock, but I don’t know how much pain it will involve.

If any of you decide to open an ISA with IBKR, I’d be very interested in your experience!

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30 thoughts on “Interactive Brokers ISA – A New Option?

  1. This is very interesting. A few initial thoughts:

    – Are you sure IBKR charges inactivity fees? My understanding was that these have now been set to zero for individual accounts. See https://www.interactivebrokers.co.uk/en/index.php?f=38234
    – I wonder if they will provide US citizens with 1099-DIV/1099-B tax documents. If not, then there will be more work involved in filing your US tax return compared to a straight brokerage account.
    – It’s a shame, but hardly surprising given the ISA regulations, that it will be limited to UCITS funds (even if you qualify for professional categorisation presumably).
    – It does open the intriguing possibility of creating say a 20-share US-based share portfolio – which is likely to be closer to a world tracker than something based purely on the FTSE100. However, personally I would follow the same strategy as my UK portfolio by sticking to a equal-sector-weight rather than market-cap-weight given the dominance of the FAANG stocks in the S&P index. But as you say, you might be even better off buying a few US-domiciled conglomerates such as Berkshire Hathaway.
    – I find the IBKR interface truly horrible for simple buy and hold share trading. As you say, customer service is extremely limited. Hardly surprising when you are one of millions of customers and likely a very small fry in their eyes.

    It is certainly something worth thinking about, but I’m not sure if it’s enough to lure me away from HL…

    Jeff.

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    1. Sorry for the late reply, somehow your comment got flagged as spam!

      -The inactivity fee has been removed for brokerage accounts, but the £3 a month fee/minimum commission looks to be specific to ISAs. I suppose to cover the extra admin costs.
      -No idea on the 1099s yet, it’s a good question. Wouldn’t be a disadvantage compared to other ISA providers if they don’t, but a nice advantage if they do.
      -And yes, the UCITS is, as always, a shame. Still stuck with individual stocks in the ISA, and without any options loophole to try to get US ETFs either.
      -The lower transaction fees and very cheap currency exchange fees would make a direct pseudo-index more feasible, whether 20 US shares or the 20 biggest cap in the world (not that there’s much difference these days…), but I agree that some kind of sector matching makes sense or you wind up super heavy on tech.
      -Totally agree on the interface. I can make it work, but it’s not any fun – makes Vanguard look slick and modern!

      I’ll let it go for a while and see how any initial user reports go. It’s not attractive enough to definitely jump, but always good to have option.

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  2. Thanks for this. I was contemplating on transferring from HL to IB. I have enjoyed HL customer support and their user interface although their fees are high. The thing I tend to ignore is the selling fees even though I don’t trade that often, and mostly do only US stocks. I am not a US citizen and don’t do periodic investing, but have target exposures and buying levels, So it does sound like avoiding hundreds of pounds every year with whatever limited amount of trading I do on HL in FX fees is a no brainer. I have only ever had to contact customer support twice or so, so would have to hope I won’t need it from IB and potentially be left in the lurch. Maybe the best thing is to move most of my holdings leaving a small amount in cash on HL to retain the account, and that way I don’t incur any fees. As you mentioned, IB’s interface can be intimidating for beginners, but everything is somehow there with the largest selection of investments possible within UK rules (assuming this is the case for their ISA. Derivatives and margining of course won’t be there in ISAs). They have an excellent phone app and the web interface has now got nearly the same features as the app. For ISA, I suspect they would be using the same app as the one I have been given for my regular margin and cash accounts.

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    1. I expect you’re right on the app front – my IRAs and taxable accounts with IBKR are all in the same interface. Just like switching between an ISA and GIA on HL.

      If you’re doing any sort of active trading at all, even just a handful of trades a year, and especially if they’re in any currency other than GBP, IBKR would definitely stand out as cheaper than HL. If you’re not a US citizen though, there might be somebody else out there even cheaper, US citizens are just very constrained in who wants to work with us. My usual pointer is to the Monevator comparison, which they haven’t updated for IBKR’s ISA yet: https://monevator.com/compare-uk-cheapest-online-brokers/

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  3. You mention that individual stocks are the only way to avoid PFIC. Does IBKR allow to use options in the ISA so that you could get assigned a basic vanguard fund eg VTWAX or VT? I believe either of those are recognised by HMRC has valid funds and therefore do not create issues with either US nor UK taxes

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    1. From the way I read IBKR’s rules on the ISA, they won’t allow options at all, so that loophole won’t be an option in an ISA. You’re right that VT would be fine (VTWAX isn’t HMRC reporting, but VT is – they’re the same fund, just in mutual fund vs ETF versions), if you could actually buy it.

      The options loophole would work fine in a taxable IBKR account with options enabled.

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  4. Hi! This is an amazingly helpful blog for a us citizen living in UK as I am, starting my investment journey.

    Would it be possible for you to do a blog on tax harvesting uk reporting us funds out of an ISA? I’m unsure how you make use of the uk personal allowance without triggering higher capital gains in the us

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    1. Hi Carter, glad you like it!

      A post on tax loss/gain harvesting is a good idea, don’t think that would be too hard to pull together, look at how it works from the perspective of both countries. The good news is there’s considerable overlap.

      Just to make sure I understand your specific situation: you’re holding HMRC reporting funds which are US-domiciled in a taxable account (not a pension, SIPP, IRA, ISA, etc.), right? If so, the short answer is that it’s tough to use the UK’s capital gains allowance without paying US capital gains (same idea is true for dividends from these funds in this account). The only way to get out of US capital gains tax would be for total income (not just capital gains) to be under the 0% capital gains tax bracket (for 2022, $41,675 for single and MFS, $55,800 HoH, $83,350 for MFJ), and for the capital gains to be long term (short term is taxed at income rates). Any long term gains above that are taxed at 15% or more (although the thresholds for “more” are fairly high).

      This is one of those annoying cases where there’s no double taxation, but the UK’s fairly generous tax-free allowances just means the US gets to tax you on capital gains (and dividends) instead, up to the level of the tax free allowance. As soon as you exceed the £12,300 allowance, the UK gets to tax the £12,301st pound at 10% (basic rate) or 20% (higher rate) (18% and 28% for residential property that isn’t your own residence). If you do manage to have that much capital gains and stay a basic rate taxpayer, since the UK tax is 10% and the US is 15%, you’d wind up paying 10% to the UK and another 5% to the US, after Foreign Tax Credits. Or if you’re a higher rate taxpayer, you’d pay 20% to the UK and nothing to the US (although you would pay US tax on the first £12,300 – probably at 15%, so £1,845).

      In short, if you’re a higher rate taxpayer with total income in the US 15% capital gains bracket, using your £12,300 capital gains allowance locks in a 15% US tax now but possibly avoids 20% UK tax later, assuming rates and allowances don’t change and you’d eventually otherwise need to realize more than £12,300 in gains.

      If you’re needing to realize those gains in order to spend the money, it makes sense to save that 5%. But if you’re just trying to harvest gains now to avoid future taxes, it’s less clear to me that it’s worth it to pay 15% now instead of 20% later.

      However, if you’re in the US 0% capital gains bracket, by all means max out that bracket or the UK capital gains allowance, whichever is more limiting in your situation – that avoids capital gains tax altogether. Probably not that useful while working, but could be a good strategy once you stop having significant earned income.

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  5. Seeing as I could well be facing the foreign tax credit “adjustment exception” cliff-edge some day due to having more than $20,000 a year in foreign qualified dividends and capital gains, I think the IBKR ISA could well be an interesting option. It avoids UK dividend and capital gains tax, avoids the need to file complex foreign tax credit forms, uses the beneficial US tax rates on qualified dividends and long-term capital gains, whilst avoiding the adjustment exception if I hold only US-listed individual shares. I could also therefore diversify my current FTSE100 portfolio by accessing a few more sectors under-represented in the UK, such as tech hardware/software/services, industrials, media, Berkshire, etc. I like it 🙂

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    1. It’s definitely an option I’m glad to have out there – any competition in the ISA world for US citizens is welcomed 🙂

      For non-GBP stocks, it’s far and away a better option than HL or even most/all of the other ISA providers, including the ones that won’t accept US citizens. The tiny currency conversion fees are a huge benefit.

      If you do open one, I’d love to hear your experience, and answer my outstanding question about whether Tiered pricing is actually available (hopefully).

      Of course, what would be really nice is if the UK ditched the MiFiD rules and we could just buy US ETFs in an ISA, whether HL, IBKR, or anybody. That would very neatly solve all those same problems, with much greater diversification and minimal costs. Dealing fees hardly matter if you could just buy £20k of VT once a year. Currency conversion would still matter, so IBKR would save 1%ish there.

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      1. Another option if you have more than EUR 500k in total assets with IBKR is to elect to have professional status which allows you to voluntarily bypass the MiFiD protection and buy US ETFs. If you do this in your main IBKR account you can then grandfather the exception to the ISA account as well.

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      2. This is an option I’ve heard about but curious if you’ve actually done it? Not doubting it, more just wondering what the mechanics are of convincing IBKR that you qualify as a professional? If it’s straightforward, this would be a huge benefit!

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      3. I actually managed to qualify for professional status at IBKR last year, but only because I happened to have been moving a whole bunch of investments around between accounts. It was a pretty high bar to reach and I can’t imagine ever reaching it again. I just hope they never re-check my account to see how little money or activity is going on. I had to send pdf copies of statements and a spreadsheet showing the total number and total value of assets and transactions made in a 12-month period, in Euros. The application stalled for months, but as soon as I contacted customer support the account was open in a few days. I used all the listed shares/ETFs I had and moved in my ISA and SIPP and a joint brokerage account I had with my dad. The actual requirements are listed here: https://ibkr.info/node/3298. I’m very surprised that they would allow the professional status to work on the ISA, but that would be bloody brilliant! Do you have first-hand experience of this? I might be willing to give it try just for this feature. Also, I wonder if they will provide 1099s to US persons – that would be icing on the cake. BTW I tested the professional client status on the general brokerage account in 2021 and bought a tiny amount of a pair of US-domiciled HMRC reporting funds and it worked fine.

        Don’t forget that you get £2,000 of dividends tax-free outside an ISA or SIPP in the UK anyway, and there’s the UK capital gains tax threshold. Bonds and bond funds would use your personal savings allowance (£500 or £1000 depending on your tax rate). Finally, foreign dividends and capital-gains within a US-domiciled fund will still count towards your “form 1116 adjustment exception” but this is very unlikely to be an issue, especially if you’re buying VT (foreign yield only about 0.7%), and you wouldn’t be using FTCs for an ISA anyway.

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      4. Yes, I did it back in 2018 when the MiFiD rules came in effect. It was straightforward, I had to fill in and sign a form and make sure I had assets exceeding 500k in the platform, it then took a couple of days for them to approve it. Also, once you have this status, it doesn’t go away if subsequently your account balance drops below 500k. And regarding grandfathering the status to ISA I called them yesterday and they confirmed that it is indeed the case. I haven’t opened an ISA with them yet because you can’t transfer in yet and I have used my allowance this tax year, but come April I think I will do it.

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  6. Another interesting feature of the IBKR ISA is that it’s covered under the US SIPC compensation scheme up to $500,000 instead of £85,000 under the UK FSCS. IBKR also has twice the assets under management and over 3 times the market cap as HL. So no small fry. Obviously a broker failure is a worst case scenario, but worth keeping in mind. Also, they hope to accept in specie transfers-in later this year.

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    1. Good point – certainly agree IBKR is no small company. Not super well known outside a few circles (professionals, US expats, and day traders), but no fly by night little startup.

      The in specie transfers would be excellent, too. At this point, I’m thinking that I’ll make my 2022-23 contributions with HL, but see how things play out and potentially look to transfer to IBKR for 23-24. In my situation, the differences aren’t radical, but want to see how it looks in practice.

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  7. Well that was quick! I took the plunge and opened an IBKR ISA yesterday. As I already had an IBKR brokerage account, the ISA was opened within minutes. I was able to make my first 2021/22 ISA contribution using faster payments from a UK current account. I presume I could have used Wise to push USD into the account via the wire transfer instructions they give you. You can’t pull money into the account from IBKR. You first request a transfer via IBKR, get a one-time reference number, then go to your UK bank to make the transfer quoting the reference. I assumed the payee was a “Business Account” although I could only fit “Interactive Broker” into the company name (on my bank website) and I couldn’t verify the payee details. However the transfer went fine and took less than an hour to arrive. The base currency of the account is displayed in GBP, so you see exactly what you transferred from the UK. I wasn’t able to operate the account until next business day after opening it. When you place an order, there’s a drop-down menu to select which account to use. I already have Mifid professional categorisation on my brokerage, so I was indeed able to buy a small batch of Vanguard Total World (VT) with a commission of just $1.00. I placed a Mid Price order with a price cap (to ensure I would have enough money left in the account to pay any annual fees). I requested x number of shares and checked the approx required amount in USD would be covered by the GBP I wanted to spend. The order was immediately filled. You can see they automatically covert your GBP to USD just before the order (at what appears to be a very good rate). It was broken into two currency trades. It looks like you only sell a round number of pounds at a time. So I’ll need to report any income/gains on the account to the IRS in USD, but the cash is always held in GBP. But nothing to report to HMRC… Woo hoo!

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    1. Very interesting – that’s huge, to be able to buy a US, HMRC-reporting ETF inside an ISA. Now just have to figure out how to get the professional status – was the €500k all within IBKR, or just across all investments? I can certainly engineer 40 trades in a year totaling €200k with at least 1 trade a quarter; I get 99% of that with just my ISA annual investment and dividend reinvestments, and could do €200k in a few big trades in an IRA or 401k. But if it all has to be at IBKR, that’s a higher bar.

      Other question now that you’re in – can you choose between the Fixed and Tiered pricing in the ISA? If you can get professional status it won’t make much difference (just buy VT and done), but for people who can’t get that yet, Tiered makes a significant difference in cost in a pseudo-index approach with 20ish stocks.

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      1. None of my qualifying trades or assets were with IBKR. They were mostly in my SIPP and ISA and a few were in a joint US brokerage account. As you say, you could probably engineer the qualification by swapping around a few large holdings, but you’d obviously be subject to trading costs and spreads on doing it. I don’t honestly understand the fixed/tiered pricing setup. I assume I’m on an IBKR Pro account with fixed pricing. I’ll be dealing so little and so small that it is perfect for me.

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      2. That sounds painless enough. Just pulled it together and I’ve easily got enough trades (a lot of tax-free, dealing fee-free reshuffling in my IRA last year as I tried to optimize things, plus my ISA investments), so just submitted the request to recategorize. Hopefully that’s approved fairly easily.

        The tiered pricing is generally cheaper, but also incredibly confusing and opaque. If you’re dealing very little, it probably makes no practical difference – I’m in the same boat, I changed it to tiered and now just don’t worry about it. Minor thing for buy-and-hold investors like us.

        If that all works, may just put my 2022 ISA in IBKR, then transfer over when they allow it. Competitive fees and being able to buy an index fund is an easy win. Next challenge will be figuring out how to do the same for my wife’s ISA, there’s not enough in her name to qualify as a professional. That may just stay at HL indefinitely unless I can somehow inherit my professional status to her ISA account – probably unlikely, that even just sounds shady.

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      3. Unfortunately, no such luck for me – IBKR said I met the two requirements, but “While you might meet two of the three criteria, based on the internal assessment of client’s expertise, experience, and knowledge, IBUK is not reasonably assured that, in light of the nature of the transactions or services envisaged, you’re capable of making your own investment decisions and understand the risks involved.”

        Guess they’re just covering their own backsides in case I decided to do something crazy with the professional status, but all I want to do is buy some VTI! Ah well, will just continue with my pseudo-FTSE ISA at HL for this year, maybe try again with IBKR next year.

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  8. Does the ISA offer out of hours to US stocks like their cash/margin accounts? What happens with settlement in the ISA? I know in the margin account you can’t say trade without limits unless you have more than $25k but funds are useable straight after selling a stock and you can then sell again without any free riding concerns. I know in a cash account you can say trade as many times a week as you want but only with settled fund and free riding isn’t allowed. What rules if any are attached to the IBKR ISA? Thanks

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  9. Another advantage of the IBKR ISA (compared to say Hargreaves Lansdown) is that presumably the account does not require reporting on an FBAR or form 8938. Whilst the account follows the ISA rules, from what I can tell the account and any cash/shares are entirely US domiciled. Do you correct me if you think I’m wrong…

    FAQ 21. How safe is your IBUK Stocks and Shares ISA?
    Interactive Brokers (U.K.) Limited (IBUK) is authorised by HMRC to act as an ISA manager and is authorised and regulated by the Financial Conduct Authority. Your account is held with IBUK’s US affiliate, Interactive Brokers LLC, regulated by the US SEC and CFTC and member of the SIPC (www.sipc.org) compensation scheme.

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    1. I think that’s one you’d want to be very careful of the details. I don’t have an IBKR ISA (yet), but I have both a taxable account and a Roth IRA. The taxable account is actually with IBKR’s UK subsidiary – so I report it on my FBAR – but my IRA is with the US subsidiary. From the text you have there, it does look like it’s with the US subsidiary, so I’d agree that you shouldn’t need to report it, but would definitely double check on the actual account documentation once opened.

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      1. Are you sure about your taxable IBKR account being UK located? Everything I can see in the IBKR customer agreement says that the assets are held with IB LLC (not IB UK) i.e. “outside the UK”. Namely sections: Part 1 (lines 3 & 8) and Part 2 (lines 1.2 and 10.2):

        3. Interactive Brokers LLC (“IB LLC”) is a U.S.-located affiliate of IB UK. IB LLC is registered as a brokerdealer
        with the U.S. Securities and Exchange Commission and as a futures commission merchant with the
        U.S. Commodity Futures Trading Commission.

        8. IB UK requires IB UK Customers to remit all funds related to their IB UK Transactions or to their IB UK
        Accounts, or otherwise tendered pursuant to the IB UK Customer Agreement, either: (a) directly to IB LLC
        or (b) to a designated financial institution with which IB LLC maintains a customer account. Funds
        maintained by IB LLC are maintained in customer accounts that are held in the name of IB LLC and are
        located outside of the U.K.

        1.2 Services Provided:
        1. IB UK shall provide the following services to Customer: (a) Through the Interactive Brokers
        System (“IB System”), IB UK shall facilitate Customer’s access to IB LLC with a view to IB
        LLC receiving and accepting orders from Customer for the specified securities, options,
        futures, and other investment products that may be available from time to time to the type
        of customer account for which Customer has been approved. IB LLC is responsible for the
        receipt of orders by Customer. (b) Through its execution and clearing agreement with IB
        LLC (“Execution and Clearing Agreement”), IB UK shall provide for the execution and
        clearing of such transactions (“Transactions”). Pursuant to the Execution and Clearing
        Agreement, Transactions may be executed and/or cleared by IB UK, IB LLC, another
        affiliate of IB UK, or a non-affiliated third party.
        2. As set forth in Section 10 of this Agreement, IB LLC shall provide client money and custody
        services for Customers and, with respect to the provision of such services only, Customer
        shall be a customer of IB LLC, and not of IB UK. With respect to the provision of all other
        services under this Agreement, Customer shall be a customer of IB UK. IB LLC is located
        in the United States.

        10.2 United Kingdom Client Money and Custody Rules:
        1. IB LLC is located outside of the United Kingdom and IB LLC may deposit and hold money,
        securities, and other assets (including, but not limited to, collateral and safe custody
        investments) on behalf of Customer in accounts that are located outside of the United
        Kingdom. The legal, regulatory, and settlement regime applicable to IB LLC and to the
        entities in which Customer’s money, securities and other assets will be held will be different
        from that of the United Kingdom (i.e., any client money and custody Rules promulgated by
        the FCA will not apply). Among other things, different practices for the separate
        identification of Customer’s money, securities, and assets may apply and, in the event of a
        default of IB LLC or the entity in which Customer’s money, securities and other assets are
        held, Customer’s money, securities and assets may be treated differently from the position
        that would apply if the money, securities or assets were held in the United Kingdom.
        2. To the extent that IB LLC holds Customer money, securities, or other assets, IB LLC will
        hold such money, securities, and assets in accordance with the rules of the U.S. Securities
        and Exchange Commission (“SEC”) and the U.S. Commodity Futures Trading Commission
        (“CFTC”), as applicable.

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      2. I’ve found this in the IBKR FAQs also:

        Do I need to file an FBAR for my IB UK account?

        You do not necessarily need a Foreign Bank Account Report (FBAR) for your Interactive Brokers account because you will be receiving proper 1099 reporting. Interactive Brokers provides a 1099 document for all U.S. citizens, whether they live in the U.S. or abroad, which you can print from Client Portal.

        Usually, an FBAR is required for Foreign Bank or Broker accounts, meaning Non-U.S. bank/brokers that do not provide a 1099 document. However, we do provide a 1099 document as we are compliant with IRS reporting requirements for any customer that has a valid Social Security Number. Although your account is held via IB UK, the assets in your account are custodied by Interactive Brokers LLC (United States). IB UK is wholly owned (not separate from) Interactive Brokers LLC, USA. We are a U.S. broker and all of our subsidiaries around the world are wholly owned.

        With that in mind, you do not necessarily need to file an FBAR for the Interactive Brokers account, but if it makes you more comfortable to do so you certainly can.

        The address for Interactive Brokers LLC (custodian of your assets and all IB UK customer assets) is shown below:

        Interactive Brokers LLC
        One Pickwick Plaza
        Greenwich, CT 06830
        United States

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      3. I think you might be right – the fact that it says “Interactive Brokers (UK) Ltd.” on my statements led me to believe that I should report them, but digging further, I find the note:

        “Interactive Brokers (U.K.) Ltd. (“IB UK”) acts as agent in transactions in securities, exchange-traded commodity futures and options, and foreign currencies. For transactions in these products, IB UK.s U.S. affiliate Interactive Brokers LLC (“IB LLC”) provides trade execution, Client Money and Custody Services. IB LLC holds Customer money, securities, or other assets under the rules of the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Commodity Futures Trading Commission (“CFTC”), as applicable. For assets held with IB LLC, different practices for the separate identification of Customer’s money, securities, and assets may apply and, in the event of a default of IB LLC, Customer’s money, securities and assets may be treated differently from the position that would apply if the money, securities or assets were held in the United Kingdom…”

        I didn’t get a 1099 from IBKR for 2021, but I realize it might not have been required – there were no dividends or capital gains. I found some tax forms on FOREX trades, which I didn’t realize I had and am hopefully ok ignoring…only the income/loss in the day or so between a deposit and converting.

        Since I already reported my IBKR account last year, I might just keep doing it (the extra 10 seconds to add a line to my FBAR is a lot less time than ever answering any questions about it), but I agree you probably don’t need to based on the fine print.

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      4. Agreed. I don’t have an issue with adding an extra FBAR/8938 entry. Although I’m convinced the reports just go into a virtual shredder at the IRS…

        Like

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