Introduction: Code of Practice 9 and the American Filer in Britain
Code of Practice 9 is the booklet HMRC posts when it suspects you have deliberately understated your tax. For a wealthy American in Britain, no piece of post matters more. Furthermore, it arrives without warning. HMRC does not tell you what it knows, nor which year troubles it. Instead, it offers you a contract, and it gives you sixty days to decide.
Most published guidance on Code of Practice 9 treats you as a purely British taxpayer. Consequently, it misses the problem that matters most in a cross-border household. If you accept the offer, you must admit deliberate conduct in writing. Meanwhile, the IRS Streamlined Filing Compliance Procedures demand the opposite. You must certify, under penalties of perjury, that your American failures were non-wilful. Those two documents cannot both be true about the same account.
At TaxYork we prepare US and UK returns for investment bankers, fund principals, private company owners and long-settled dual nationals across London and the Home Counties. Therefore, we see this collision at close range. This guide explains what Code of Practice 9 actually involves. Furthermore, it shows how the penalties are calculated for someone with American assets. Finally, it explains how to sequence the two disclosures.
Why Code of Practice 9 Reaches Cross-Border Households So Often
Code of Practice 9 reaches dual filers disproportionately, and the reason is data. HMRC receives automatic reports on UK residents from more than a hundred jurisdictions. Furthermore, reciprocal reporting under FATCA brings American brokerage and bank data into the same system. Additionally, the Common Reporting Standard covers most of the rest of the world. Consequently, the account you assumed was invisible in Britain because it sits in Boston or Baltimore is not invisible at all.
Wealthy taxpayers also present larger absolute losses of tax, and HMRC allocates its fraud resources by value. Notably, a single omitted investment portfolio can produce a six-figure liability once fourteen years of dividends and gains are added together. Accordingly, the profile that attracts Code of Practice 9 is precisely the profile we serve.
What This Guide Covers
This guide works through the mechanics of the Code of Practice 9 contract, the sixty-day deadline and the outline disclosure. Subsequently, it examines the penalty arithmetic, including the offshore loading that most articles quote incorrectly for American accounts. Lastly, it addresses the US consequences. Those include the Streamlined problem and the foreign tax credit fallout from a twenty-year UK settlement. Moreover, sequencing determines how much of your UK tax you can actually use.
What Code of Practice 9 Actually Is
Code of Practice 9 is a formal HMRC procedure, published as a booklet and sent under cover of an opening letter. It offers you a contract where HMRC suspects deliberate behaviour causing a loss of tax. Importantly, it is a civil process with a criminal dimension attached. The current version of the Code of Practice 9 booklet dates from June 2023 and applies to every tax, duty, levy and contribution HM Revenue and Customs administers.
The Code of Practice 9 offer is not an accusation you must answer point by point. Rather, it is a commercial bargain. HMRC gives up its right to prosecute you criminally for the conduct you disclose. In return, you give up any prospect of arguing that nothing deliberate occurred.
The Contractual Disclosure Facility Explained
The Contractual Disclosure Facility is the mechanism through which Code of Practice 9 operates. HMRC offers a contract; you accept it by signing and returning the acceptance letter enclosed with the opening correspondence. As HMRC's own Fraud Civil Investigation manual puts it, the offer and your acceptance "are what create a valid contract".
Acceptance commits you to more than paperwork. Specifically, you undertake to provide an Outline Disclosure and, later, a Formal Disclosure supported by certificates of full disclosure and of assets and liabilities. Moreover, you undertake to help HMRC bring the investigation to a conclusion, which in practice means attending meetings and answering questions.
You can also enter the facility on your own initiative, without waiting for a letter, by making a voluntary approach. Consequently, a taxpayer who knows the position is serious does not have to wait to be found.
The Sixty-Day Clock and the Outline Disclosure
You have sixty days from the date you are offered Code of Practice 9. Within that window you must return both the signed acceptance and the Outline Disclosure. The Outline Disclosure is a summary, not a computation. Nevertheless, it must identify every area of deliberate conduct, because the protection you receive is measured against it.
Sixty days sounds generous. In practice it is not, particularly where records span two countries, several currencies and a decade of investment activity. Therefore, the first working week should go on securing bank and broker statements rather than on arguing about the merits.
Missing the deadline is treated as rejection. Subsequently, HMRC proceeds without your cooperation, and it may investigate criminally.
What the Criminal Promise Does and Does Not Cover
The immunity under Code of Practice 9 is real, but it is narrow. HMRC undertakes not to investigate you criminally for the conduct you disclose in your Outline Disclosure. Conversely, conduct you conceal is outside the contract entirely, and a materially false disclosure can itself constitute a fresh offence.
This matters enormously for an American client. Specifically, the promise is HMRC's alone. It binds no US agency, it does not touch the Department of Justice, and it offers nothing in respect of Title 26 or Title 31 exposure. Accordingly, treating a UK criminal promise as global comfort is a serious error.
How HMRC Chooses Who Receives a COP9 Letter
HMRC does not issue Code of Practice 9 letters at random. Nor does it issue them on suspicion of carelessness. Instead, the Fraud Investigation Service opens a case where the evidence suggests deliberate behaviour and the tax at stake justifies the resource. Understanding the selection logic tells you a great deal about what HMRC already holds.
FATCA, CRS and the Data Behind the Letter
International exchange is now the dominant source. American clients frequently assume that FATCA runs in one direction only, from British banks to Washington. However, the intergovernmental agreement is reciprocal, and HMRC receives US account data in return. Furthermore, from 2026 the upgraded reporting standard widens the categories of reportable financial assets.
Because the data arrives annually and is retained, a pattern of omission across many years is visible in a single view. Consequently, the letter you receive in 2026 may rest on reports covering a decade. Practically, this means that arguing about whether HMRC can prove year one is usually wasted effort.
The Twenty-Year Look-Back for Deliberate Behaviour
Where behaviour is deliberate, HMRC can assess twenty years of tax. That is the figure every practitioner quotes, and it is correct. Additionally, for offshore matters a separate twelve-year assessment window exists for non-deliberate errors, so even an innocent mistake reaches back further than the ordinary four or six years.
Twenty years of tax carries twenty years of interest, and interest is not a penalty that can be negotiated away. Therefore, in most settlements the interest column is second only to the tax itself. Notably, interest runs from the original due date, not from the date HMRC wrote to you.
Accepting, Rejecting or Ignoring the Offer
Three responses to Code of Practice 9 exist, and each carries a distinct consequence. If you accept and disclose fully, you obtain the criminal promise and you retain meaningful influence over the penalty outcome. Alternatively, if you genuinely did nothing deliberate, you may reject the offer and submit a denial, at which point HMRC investigates on its own terms.
Rejection is not a safe default. Specifically, HMRC may then open a criminal investigation, and the cooperation reduction that would have cut your penalty is no longer available. Meanwhile, silence is the worst of the three, because it forfeits the protection without producing any argument in your favour.
The Penalty Arithmetic for a US-Connected Taxpayer
Penalties under Code of Practice 9 are negotiated, not fixed, and the negotiation follows a published framework. HMRC starts from the statutory maximum in Schedule 24 to the Finance Act 2007. Subsequently, it reduces that maximum according to whether the disclosure was prompted or unprompted. Additionally, it weighs how well you told, helped and gave access. Consequently, the quality of your cooperation is worth real money.
Why the 200% Offshore Headline Rarely Applies to US Accounts
Almost every published article on Code of Practice 9 quotes a maximum offshore penalty of 200%. For an American with US-situated assets, that figure is usually wrong, and the error is expensive to believe. HMRC's Compliance Handbook divides territories into three categories. Category 1 territories exchange information automatically and carry a maximum of 100% of the potential lost revenue. Category 2 carries 150%, and Category 3 carries 200%.
The United States sits in Category 1. HMRC's territory category listing names it expressly, while excluding US overseas territories and possessions, which fall into Category 2. Therefore, income from a New York brokerage account omitted from your Self Assessment return attracts a maximum loading of 100%, not 200%.
This distinction is not academic. Practically, it moves the top of the negotiating range by half, and it changes what a reasonable settlement looks like. Moreover, it means the mix of jurisdictions in your portfolio directly determines your exposure.
Failure to Correct and the Asset-Based Loading
A separate regime overlays the older years of the disclosure. The Failure to Correct rules apply to offshore non-compliance for tax years up to 5 April 2017 that was not put right by 30 September 2018. Under those rules the standard penalty is 200% of the tax, reducible to a minimum of 100%. Importantly, that minimum is a floor, so the cooperation discounts that help you in later years cannot take you below it.
Many commentators state that this regime closed years ago. In fact, it still governs the pre-2017 slice of any current disclosure, and for a taxpayer with fifteen years of errors that slice is often the larger half. Additionally, a further asset-based penalty may apply where the tax in a single year exceeds £25,000. It can reach 10% of the value of the asset connected to the failure.
Naming is also possible. Consequently, reputational management belongs in the plan from the first week, not the last.
Interest, Payments on Account and Cash Flow
A Code of Practice 9 settlement is payable, and HMRC expects payment on account while the work continues. Furthermore, making payments on account stops interest accruing on the amounts paid, which in a long case saves a substantial sum.
Cash flow deserves specific attention in a cross-border household. Liquidating a US brokerage position to fund a UK settlement triggers US capital gains tax, and possibly UK tax on the same disposal. Therefore, the funding decision is itself a tax decision, and we model it before any asset is sold.
The Collision With IRS Streamlined Filing
Here is the point that no UK guide on Code of Practice 9 addresses and that every American reader needs. Code of Practice 9 requires you to admit deliberate conduct. The Streamlined procedures require you to swear the opposite. Consequently, accepting the UK contract without thinking about the US position can permanently close the cheapest American remedy available to you.
Non-Wilful Certification Versus an Admission of Deliberate Conduct
Under the Streamlined Foreign Offshore Procedures you file three years of returns and six years of FBARs. Additionally, you sign a certification on Form 14653. That certification states, under penalties of perjury, that your failures resulted from non-wilful conduct, meaning negligence, inadvertence, mistake or a good faith misunderstanding of the law. Qualifying taxpayers resident abroad pay no offshore penalty at all.
Now place that beside a Code of Practice 9 Outline Disclosure. In it, you have told HMRC that you knowingly omitted an offshore account for fourteen years. The same facts, described honestly, cannot support both documents. Therefore, where the underlying conduct genuinely was deliberate, the American route is the Voluntary Disclosure Practice, not Streamlined.
The reverse error is equally costly. Some taxpayers accept Code of Practice 9 reflexively because the letter frightens them, even though their conduct was careless rather than deliberate. Consequently, they surrender a clean Streamlined submission for no reason. Assess the character of the conduct first, and choose the UK route accordingly.
When the Worldwide Disclosure Facility Is the Better UK Route
Britain offers a second door. The Worldwide Disclosure Facility allows you to correct offshore non-compliance without admitting fraud, and it accommodates careless as well as deliberate behaviour. However, it confers no criminal immunity whatsoever, and HMRC expressly reserves the right to prosecute.
The choice therefore turns on your honest assessment of the conduct. If it was careless, the Worldwide Disclosure Facility preserves your Streamlined certification and remains available. Alternatively, where the conduct was deliberate, the criminal promise under Code of Practice 9 is worth having. The US plan must then be rebuilt around that fact.
Choosing the wrong door is difficult to undo. Accordingly, we take a written view on the character of the conduct before any form is signed. Furthermore, we build both positions from one analysis of your foreign accounts and reporting history.
The IRS Voluntary Disclosure Practice and the 2026 Proposals
Admitting deliberate conduct under Code of Practice 9 points you towards the Voluntary Disclosure Practice instead. You enter it through Form 14457, and IRS Criminal Investigation administers it. The disclosure period covers the most recent six years. Historically, the terms have imposed a 75% civil fraud penalty on the year with the highest tax correction. A wilful FBAR penalty applies on top. That penalty is the greater of 50% of the balance or an inflation-adjusted amount, currently $165,353.
That framework may be about to change. On 22 December 2025 the IRS invited public comment on a proposed overhaul. Under it, a 20% accuracy-related penalty for each year would replace the 75% civil fraud penalty. The comment period closed on 22 March 2026, and the National Taxpayer Advocate published her own analysis of the proposal in February 2026.
As at August 2026 the revised terms remain a proposal. The IRS has said that final procedures would take effect six months after publication. Consequently, timing a US disclosure now involves a genuine judgement about whether waiting improves the arithmetic, and that judgement should be made with the UK deadline in view.
Foreign Tax Credit Consequences of a Long UK Settlement
A twenty-year settlement under Code of Practice 9 does something peculiar to your American return. It generates an enormous amount of British tax, all payable in a single calendar year, relating to income you reported to the IRS long ago. Unless you plan for it, most of that tax produces no US benefit at all.
Section 905(c) and the Duty to Notify the IRS
When your foreign tax liability changes after you have claimed a credit, section 905(c) requires you to notify the IRS. This is a duty, not an option, and it applies whether the change increases or decreases the tax. Furthermore, a redetermination that reduces your foreign tax and is not reported carries its own penalty.
In a Code of Practice 9 settlement the change is usually an increase, which is helpful rather than harmful. Nevertheless, the mechanism still has to be operated correctly, year by year, on amended returns. Therefore, the UK settlement schedule should be built so that each year's additional UK tax is separately identified.
The Ten-Year Window for Amended Credit Claims
Americans enjoy an unusually long window for foreign tax credit claims. Where the claim relates to foreign taxes, a special limitation period applies. It runs for ten years from the due date of the return for the payment year. Consequently, a client settling in 2026 can reach back to roughly 2016.
The years before that are simply lost. Practically, in a fourteen-year settlement, five or six years of British tax fall outside the window. That tax can never be credited against the American tax already paid. Notably, this is the single largest avoidable cost we see in these cases, and it is invisible until someone builds the schedule.
Nothing recovers those older years once the window has closed. Therefore, the only defence is to open the US work early, in parallel with the UK disclosure, rather than waiting for the settlement to conclude.
Cash Basis Versus the Accrual Election
Most individual American taxpayers claim credit for foreign taxes on the cash basis. Under that method, £700,000 of British tax paid in 2026 belongs to 2026, regardless of the income year it relates to. Consequently, the credit collides with a limitation that was computed on a single year of foreign income, and the excess simply carries forward.
An election under section 905(a) to claim credits on the accrual basis relates the tax back to the year in which the underlying income arose. Importantly, that election is irrevocable and binds all future years, so it must never be made casually. Nevertheless, in a long settlement it often decides whether your British tax is used or wasted. Therefore, we model both bases before advising, as part of our US-UK treaty and credit work.
Sequencing the Two Disclosures
Sequencing a Code of Practice 9 disclosure alongside an American one is where cross-border experience earns its keep. Two revenue authorities are working to different timetables, different standards of behaviour and different limitation periods. Accordingly, the order of operations changes the outcome by material sums.
Why the UK Timetable Usually Drives the US One
The Code of Practice 9 deadline is immovable, and no American procedure imposes anything comparable. Consequently, the UK clock sets the pace. However, draft the Outline Disclosure with the American certification already in mind. The words you choose in London will be read in Washington if the file is ever examined.
We therefore prepare a single factual chronology covering both countries before anything is filed. Subsequently, that chronology feeds the Outline Disclosure, the Formal Disclosure, the amended US tax returns and any FBAR filings. Furthermore, consistency across the two files is itself a defence.
Records, Privilege and What You Hand Over
The Formal Disclosure is supported by certificates you sign personally, and by the underlying records. American clients often hold documents with US advisers, and the privilege position differs sharply between the two jurisdictions. Therefore, take advice on privilege before circulating analyses by email, and note that the Chartered Institute of Taxation publishes professional standards governing how disclosures are handled.
Currency conversion also matters more than people expect. HMRC works in sterling and the IRS works in dollars, and the two authorities accept different rate sources. Consequently, a schedule that converts once, consistently, and documents the source, saves argument at settlement.
Managing Serious Defaulters and Publication Risk
Settlement is not always the end. HMRC may place you in its Managing Serious Defaulters programme, which brings closer scrutiny of your returns for a period of years. Additionally, deliberate defaulters can be publicly named where the tax exceeds the statutory threshold and the disclosure was not sufficiently full and prompt.
Full and early cooperation is the practical answer to both risks. Moreover, it is the same behaviour that reduces the penalty, so the incentives align.
Case Study: A London Fund Principal With Fourteen Years of Errors
The following illustrates how the pieces interact. Figures are illustrative and rounded, but the structure reflects the pattern we encounter repeatedly.
The Facts
Our client is a US citizen, resident in London since 2009 and a principal at a City investment firm. He held a large New York brokerage account. Its dividends, interest and gains went faithfully onto his US returns. However, he omitted them from his UK Self Assessment returns from 2011/12 onwards. Additionally, he held a Guernsey deposit and investment account, peaking at $2.1 million, which appeared on neither return and on no FBAR.
In June 2026 HMRC issued a Code of Practice 9 letter. He accepted the offer within the sixty-day window and submitted an Outline Disclosure covering both accounts.
The UK Settlement
Additional UK tax across fourteen years came to £368,000. Of that, £186,000 related to years up to 5 April 2017. Those years fell within the Failure to Correct regime. Consequently, the penalty on that slice could not fall below 100%, producing £186,000. The remaining £182,000 related to later years. It attracted a negotiated penalty of 42% of the tax, giving £76,440. That rate reflected deliberate but not concealed behaviour, a prompted disclosure and full cooperation.
Interest to the settlement date added £142,000. The total came to £772,440. Importantly, the New York account sat in a Category 1 territory. Consequently, the maximum loading on that element was 100%, not the 200% figure most guidance quotes. That distinction saved a substantial sum on the largest single component.
The US Outcome
He could not certify non-wilful conduct in respect of the Guernsey account, so Streamlined was unavailable. Consequently, he entered the Voluntary Disclosure Practice, disclosing six years of omitted Guernsey income of roughly $340,000 and additional US tax, after credits, of $58,000.
The foreign tax credit position proved decisive. Because the UK settlement was paid in 2026, only the years from 2016 onwards stayed within the ten-year window. Consequently, roughly £131,000 of genuine British tax attached to the earliest years produced no American benefit at all. Furthermore, had the work started six months later, a further year would have closed. Ultimately, the accrual election recovered a large part of the remaining exposure, and the two settlements completed within eleven months of each other.
How TaxYork Can Help
We prepare US and UK tax returns for high-net-worth Americans in Britain, and we handle disclosure work in both directions. Consequently, when a Code of Practice 9 letter arrives, you deal with one team that understands the sixty-day deadline and the Form 14653 certification equally well.
Preparing the Outline Disclosure and the US File Together
Our work begins with a single chronology of accounts, income and filings across both countries. Subsequently, we draft the Outline Disclosure so that it is complete for HMRC and consistent with whatever American route the facts support. Additionally, we quantify the penalty range under the correct territory category before any negotiation begins.
Rebuilding the Foreign Tax Credit Position
We reconstruct your credit position year by year. Additionally, we identify which years remain within the ten-year window. Subsequently, we model the cash basis against the section 905(a) accrual election. Furthermore, we prepare the amended returns and the section 905(c) notifications that a UK settlement requires.
Ongoing Compliance Once the Settlement Concludes
Settlement is the beginning of a monitored period, not the end of the matter. Therefore, we take over the annual preparation of both returns, together with FBAR and Form 8938 reporting, so that the pattern cannot repeat. We also advise on the wider cross-border planning that follows a disclosure.
Conclusion
Code of Practice 9 is a serious procedure with a genuine benefit attached, and for a taxpayer whose conduct was deliberate the criminal promise is worth having. However, the American dimension changes the calculation entirely. Admitting deliberate behaviour in London closes the Streamlined door in Washington. Moreover, a settlement paid in one calendar year can strand years of British tax. That tax would otherwise have sheltered your US liability.
Three decisions determine the outcome of a Code of Practice 9 case. First, choose the correct UK route by assessing honestly whether the conduct was careless or deliberate. Second, price the penalty against the right territory category, remembering that the United States is Category 1. Third, open the American work immediately, because the ten-year credit window is closing while the UK investigation runs.
Above all, do not answer a Code of Practice 9 letter alone. The sixty days pass quickly, and the decisions taken in the first fortnight shape a settlement that will take a year to complete.
Contact Us
Have you received a Code of Practice 9 letter? Alternatively, do you know that a disclosure is coming? We can help you plan both sides before the deadline bites. Please contact us to arrange a confidential discussion with a specialist who prepares both US and UK returns.
Email hello@taxyork.com or telephone 020 3488 8606. Alternatively, book a consultation through our website and we will respond the same working day. Furthermore, general guidance on reporting foreign income to HMRC is available at gov.uk, and impartial money guidance is published by MoneyHelper.
Disclaimer
This article provides general information about UK and United States tax rules as at August 2026 and does not constitute tax advice. Tax legislation, penalty regimes and disclosure procedures change frequently, and the figures used in the case study are illustrative only. Furthermore, your own position will depend on your residence, domicile, citizenship and the precise facts of your affairs. Accordingly, you should obtain professional advice specific to your circumstances before acting. TaxYork accepts no liability for any action taken, or not taken, on the basis of this article.