Introduction: Why the Mandatory Disclosure Rules Reach Americans in Britain
The UK's mandatory disclosure rules require a UK resident to tell HMRC, within 30 days, about any arrangement that sidesteps international account reporting or hides who owns an offshore company. Most Americans in London have never heard of them. Yet a wealthy US citizen living here is one of the people most likely to trigger them without realising it.
The reason is simple. The United States does not take part in the Common Reporting Standard, the system that tells HMRC about accounts its residents hold abroad. Consequently, when an American in Britain moves money from a Jersey or Swiss custodian to a US broker, HMRC's automatic view of that money can go dark. Furthermore, when a US adviser wraps the account in a Wyoming or Delaware LLC, the picture can disappear entirely.
At TaxYork, we prepare US and UK returns for high-net-worth Americans, investment bankers and company owners in Britain. This guide applies the mandatory disclosure rules to that reader specifically. It uses the law as it stands in November 2026, including the US beneficial ownership rollback finalised in August 2026 and the Common Reporting Standard changes that took effect on 1 January 2026.
What the Mandatory Disclosure Rules Require in One Paragraph
In short, the mandatory disclosure rules cover two things: "CRS avoidance arrangements" and "opaque offshore structures". The adviser who designs or sells such an arrangement normally reports it. However, if no adviser with a UK connection reports, the duty passes to you as the UK-resident user or beneficial owner. You then have 30 days from the first step to file electronically with HMRC, and penalties run from £5,000 to as much as £1 million.
Who Should Read This Guide
This guide is for US citizens and green card holders resident in the UK who hold investment accounts on both sides of the Atlantic. It is particularly relevant if you have restructured those accounts since 25 June 2018, or if a US private bank, family office or wealth manager has suggested holding assets through an LLC. Equally, it matters to UK founders with US holding companies, because the opaque structure test looks at company ownership, not only bank accounts.
How the UK Mandatory Disclosure Rules Work
The legal basis is the International Tax Enforcement (Disclosable Arrangements) Regulations 2023, which came into force on 28 March 2023. They replaced the UK's version of the EU directive known as DAC6 and adopted the OECD's 2018 model rules almost word for word. As a result, the mandatory disclosure rules now focus narrowly on transparency rather than on general tax avoidance.
The OECD Model Behind the Regulations
HMRC's own manual, beginning at IEIM710010 on the introduction to the mandatory disclosure rules, explains that the definitions come straight from the OECD model. That matters for interpretation. Specifically, the OECD commentary sets an objective test: would a professional adviser with full knowledge of the arrangement reasonably conclude that it was designed to circumvent account reporting, was marketed that way, or simply had that effect? Your private motive is not decisive.
Importantly, the "has the effect" limb catches arrangements that nobody intended as avoidance. Nevertheless, the model contains a safeguard. An arrangement is not caught solely because it leads to non-reporting, provided it is reasonable to conclude that the non-reporting does not undermine the policy of the reporting system.
Intermediaries and the UK Connection Test
Regulation 3 places the first duty on "intermediaries". These are promoters who design or market an arrangement and service providers who help to implement it while knowing, or reasonably expected to know, what it is. An intermediary reports only if it has a UK connection: UK residence, UK incorporation, a UK place of management, or a UK branch through which it acts.
This is where Americans fall through the net of the mandatory disclosure rules. A wealth manager in New York, a Wyoming registered agent and a Florida brokerage usually have no UK connection at all. Therefore, none of them owes HMRC a return, however clearly the arrangement fits the definitions.
When the Duty Falls on You
Regulation 7 then makes you, the "reportable taxpayer", responsible. HMRC's guidance on when a reportable taxpayer has to report gives the exact scenario of an intermediary with no UK connection as a case where the UK-resident user must file. Additionally, if a UK lawyer declines to report because of legal professional privilege, regulation 5 requires them to tell you in writing that the duty is now yours.
Your deadline runs for 30 days beginning with the day after the first step of the arrangement is implemented. Moreover, regulation 10 requires electronic filing through HMRC's service, and a return made any other way counts as not made. HMRC's page on checking whether you need to tell HMRC about a cross-border arrangement links to that service and gives the enquiry address.
CRS Avoidance Arrangements: The American Blind Spot
The first limb of the mandatory disclosure rules targets anything that defeats the Common Reporting Standard, or CRS. Under CRS, more than 100 jurisdictions send HMRC the balances and income of accounts held by UK residents. The United States is not one of them. Instead, it relies on FATCA, which is built to collect information about Americans rather than to share information with other countries.
The Seven Features HMRC Looks For
HMRC's guidance on CRS avoidance arrangements lists the features drawn from the OECD model. They include using a product that looks like a financial account but claims not to be one, and moving an account or its assets to an institution or jurisdiction that does not report to every country where the holder is resident. Similarly, the list covers converting an account into a non-reportable type, exploiting weaknesses in due diligence, and using an entity so that an investment escapes reporting or a person avoids being treated as a "controlling person".
For an American in Britain, the second feature is the one that bites. Moving assets from a CRS-reporting custodian in Jersey, Guernsey, Switzerland or Luxembourg to a US institution is, on its face, a transfer to a jurisdiction that does not exchange CRS information with the UK.
The OECD Safe Harbour That HMRC Does Not Give You
The OECD commentary tries to solve this. It says a transfer to the United States does not have the effect of circumventing CRS where the account information is exchanged under a reciprocal FATCA agreement with the holder's country of residence. On paper, therefore, Americans might seem safe.
In practice, HMRC takes a narrower view. Its guidance states that the UK-US agreement is not equivalent to CRS because it does not provide the same reciprocal level of reporting. The text of the UK-US FATCA intergovernmental agreement explains why. The US side reports only the gross interest on a deposit account held by a UK-resident individual where that interest exceeds $10, plus US-source dividends and other US-source income already subject to US information reporting. It does not report balances, sale proceeds, foreign-source income or the people who control an entity account.
Furthermore, a US citizen usually opens a US account on Form W-9 as a US person. The broker then reports to the IRS on Form 1099 and has no reason to flag UK residence at all. In our experience, that means HMRC often receives nothing whatsoever about a London-resident American's US portfolio.
What Usually Falls Outside the Mandatory Disclosure Rules
Not every transfer is caught by the mandatory disclosure rules. HMRC's guidance confirms that buying real estate with money from a reportable account does not, in itself, undermine CRS, because property is outside CRS by design. Likewise, the OECD commentary accepts that moving savings into a pension product that CRS treats as an excluded account will normally not count.
For an American, ordinary commercial reasons also carry weight. Many UK-resident US citizens hold US accounts because UK platforms refuse US persons or because US funds avoid the punitive passive foreign investment company regime. In our view, a straightforward transfer into your own name, for documented investment reasons, is far less likely to meet the "reasonable to conclude" test. However, HMRC lists warning signs that tip the balance: a structure whose only logical explanation is avoiding reporting, an uncommercial step whose only benefit is non-reporting, ownership set just below a reporting threshold, and a refusal to explain a transaction when a bank asks.
Opaque Offshore Structures and the US LLC
The second limb of the mandatory disclosure rules covers "opaque offshore structures". This is a passive offshore vehicle held through an opaque structure. Each half of that definition has a precise meaning, and US entities can meet both.
What Makes a Vehicle Passive and Offshore
A passive offshore vehicle is a company or other legal person that does not carry on substantive economic activity, supported by adequate staff, equipment, assets and premises, where it is established or tax resident. A single-member LLC holding a brokerage account, with a registered agent and no employees, fits that description exactly.
Importantly, the definition excludes a vehicle whose beneficial owners are all tax resident only in the vehicle's own jurisdiction. A US-resident owner of a Delaware LLC is therefore outside it. By contrast, a UK-resident owner is not, and a US citizen resident in Britain is, in our view, unlikely to qualify for the exclusion, because the UK also treats them as its own resident.
Why the 2026 FinCEN Rollback Matters
A structure is opaque if it is reasonable to conclude that it allows a person to be a beneficial owner while preventing accurate identification. The model lists nominee shareholders with undisclosed nominators, indirect control beyond formal ownership, and companies formed where there is no requirement or mechanism to obtain beneficial ownership information.
That last feature has made the mandatory disclosure rules more relevant to US entities this year. In March 2025, FinCEN issued an interim rule removing beneficial ownership reporting for US companies and US persons. Then, on 11 August 2026, it finalised that position with effect from 14 August 2026, as its beneficial ownership information page now reflects. Consequently, a domestic LLC formed in a state with no public member register now has no federal ownership filing either. In our view, that strengthens the argument that a US LLC can be an opaque vehicle for a UK-resident owner, particularly where a nominee manager is named on state filings.
Founders and Holding Companies
Opaque structure reporting under the mandatory disclosure rules is not limited to investment accounts. A UK founder with a dormant Delaware holding company, owned through a nominee to keep the founder's name out of investor materials, can fall inside the definition. Similarly, a US company with genuine staff and premises is not passive, so an operating business normally escapes. Our cross-border planning service reviews these holding structures alongside the corporation tax and US filing positions.
The 2026 Transparency Reset: CRS Changes, CARF and Dual Residents
Several changes this year make the mandatory disclosure rules more consequential for Americans. HMRC now receives more data from more sources. Therefore, a gap in reporting stands out more sharply than before.
CRS Amendments From 1 January 2026
The UK's regulations updating its automatic exchange of information agreements brought the revised CRS into effect from 1 January 2026. In particular, an account holder resident in two countries can no longer rely on a treaty tie-breaker to limit reporting. Instead, the institution reports to every jurisdiction of residence. Moreover, the first reports under the revised standard, covering 2026, are due by 31 May 2027.
Crypto Reporting Under CARF
At the same time, the UK began implementing the Cryptoasset Reporting Framework on 1 January 2026, including domestic reporting on UK-resident customers. US exchanges are not yet part of that exchange. As a result, shifting digital assets from a UK platform to a US one produces the same visibility gap that a brokerage transfer creates, and the same questions under the mandatory disclosure rules follow.
Why Older Arrangements Still Matter
The look-back reaches arrangements implemented from 25 June 2018. Regulation 8 required promoters to report pre-2023 arrangements by 25 September 2023, unless the account held less than US$1,000,000 immediately beforehand. That deadline has passed. Nevertheless, the mandatory disclosure rules still apply, and an unreported arrangement does not disappear, because HMRC's information powers under regulation 11 allow it to ask you directly about past steps.
Penalties, Reasonable Excuse and HMRC's Time Limits
The penalty regime for the mandatory disclosure rules, in Part 3 of the Regulations, is severe relative to the reporting burden. In addition, it applies separately from any tax, interest or penalties on undeclared income. HMRC's manual on penalties under the mandatory disclosure rules sets out how officers approach it.
How Much a Failure Can Cost
HMRC can charge an initial penalty of up to £5,000 for a failure to report. Alternatively, where that sum looks inappropriately low, HMRC can ask the First-tier Tribunal to impose up to £600 for each day of the initial period, and the tribunal may go as high as £1 million. Furthermore, a continuing failure attracts further daily penalties of up to £600 for each day after the first penalty is determined.
For a high-net-worth client, the £1 million ceiling is the one to take seriously. Tribunals reserve it for serious cases, yet its existence shows how firmly the mandatory disclosure rules treat a deliberate failure.
What Counts as a Reasonable Excuse
Regulation 20 removes liability where you have a reasonable excuse. However, it narrows that defence in three ways. Lack of money is not an excuse. Relying on advice is not an excuse if the adviser was the promoter of the arrangement, if the advice did not rest on full and accurate facts, or if its conclusions were unreasonable. Additionally, you must have maintained reasonable procedures to identify reportable arrangements.
That second point matters for Americans facing the mandatory disclosure rules. If the US wealth manager who sold you the LLC also told you nothing needed reporting in Britain, that reassurance does not protect you.
How Long HMRC Has
Regulation 17 lets HMRC determine a penalty within the latest of 24 months after the failure comes to its attention or six years after liability arose. Consequently, a 2021 transfer remains exposed well into 2027 and beyond if HMRC only discovers it later. Regulation 19 allows a reduction in special circumstances, although inability to pay is excluded.
Worked Example: A London Partner's $3.2 Million Transfer
The following illustrative case study shows how the mandatory disclosure rules apply to a realistic American client. The names and figures are hypothetical, but the structure is one we see regularly.
The Facts
Daniel is a US citizen and a partner at a London private equity firm. He has lived in Britain since 2014 and is UK resident under the statutory residence test. In February 2026 his Jersey custodian, which reports his account to HMRC under CRS, held $3.2 million in US Treasuries and a global equity index fund.
A US wealth manager in New York, with no UK office, suggested consolidating everything in the United States. The proposal recommended a new Wyoming LLC, managed by a nominee, to "keep your name off the account" and "simplify cross-border paperwork". The first step, forming the LLC and opening the US brokerage account in its name, took place on 3 March 2026. The assets moved across on 10 March.
Applying the Tests
First, the transfer moved a reportable account to a jurisdiction that does not exchange CRS information with the UK. Second, the LLC was documented as the account holder with a US address, so the US broker had no reason to report UK residence under the FATCA agreement. Third, the pitch expressly sold privacy, which goes to the "marketed as" limb. In our view, a professional adviser would reasonably conclude that this is a CRS avoidance arrangement. The nominee manager and the absence of any federal ownership filing also point towards an opaque offshore structure.
The wealth manager had no UK connection, so no intermediary return was due. Daniel was therefore the reportable taxpayer. His 30-day window began on 4 March 2026 and closed on 2 April 2026.
The Numbers
Daniel did not file. The portfolio yielded roughly $118,000 in 2026, made up of $86,000 of Treasury interest and $32,000 of dividends. As a UK resident, he owed UK income tax on all of it whatever the reporting position. At a $1.34 exchange rate, that income is about £88,060, and at the 45% additional rate the UK tax is roughly £39,627. On the US side, his foreign tax credits from UK tax on the same income would largely offset his federal liability, leaving mainly the 3.8% net investment income tax, about $4,484.
Daniel came to us in early September 2026, about 160 days after the deadline. His MDR exposure was an initial penalty of up to £5,000. If HMRC had instead sought a tribunal penalty at the maximum £600 a day, the figure for those 160 days could have reached £96,000. That is more than double the UK tax on the income itself.
What We Changed
We filed the overdue disclosure return electronically, together with a written explanation of how the arrangement came about and the steps Daniel took on discovering the duty. Furthermore, we made sure his 2025-26 and 2026-27 Self Assessment returns report the full portfolio income, with the foreign tax credit position worked through on his US Form 1040. Finally, we recommended collapsing the LLC into a directly held account in Daniel's own name, which removed the opaque element without changing his investments.
Prompt, unprompted disclosure is the strongest mitigation available under the mandatory disclosure rules. In our experience, HMRC treats a taxpayer who reports voluntarily and fixes the underlying tax position very differently from one it finds through its own enquiries.
A Practical Five-Question Test Before You Move Assets
We use a short decision process with every client who plans to restructure investments across the Atlantic. It turns the mandatory disclosure rules into five questions, answered in order.
Questions One to Three: Movement, Visibility and Purpose
The first question is whether the step moves money, an account or an entity away from an institution that reports to HMRC under CRS. If it does not, the CRS limb usually falls away. The second question is whether HMRC will still receive equivalent information after the move. A US account in your own name earning only US-source income gives HMRC partial visibility at best, while an LLC account typically gives none.
The third question is why you are doing it. Document a genuine reason, such as consolidating with a US custodian because UK platforms will not accept US persons, or avoiding the PFIC regime. In contrast, if the honest answer is privacy from HMRC, the arrangement is very likely reportable.
Questions Four and Five: Ownership and the Reporting Party
The fourth question asks whether an entity, nominee or bearer feature stands between you and the assets. If so, test it against the opaque offshore structure definition. Where the entity is passive and you are UK resident, assume it is in scope unless the beneficial ownership is fully transparent.
The fifth question asks who will report. If every adviser involved lacks a UK connection, or a UK adviser has given you a privilege notice, the return is yours. Diary the 30-day deadline from the date of the very first step, which is often the formation of an entity rather than the transfer itself.
Keeping the Evidence
To evidence compliance with the mandatory disclosure rules, keep the adviser's proposal, your emails explaining the commercial purpose and a dated note of your own analysis. Regulation 20 requires reasonable procedures, and a contemporaneous file is the clearest proof that you had them. Equally, the same file supports your US tax return preparation when your preparer needs to understand the structure.
How the Mandatory Disclosure Rules Fit With FBAR, Form 8938 and Self Assessment
A filing under the mandatory disclosure rules is an information return, not a tax return. It does not replace any other obligation, and none of the other obligations replaces it. Americans in Britain therefore need to see the whole map.
The US Reporting Layer
On the US side, you must file an FBAR if your non-US accounts exceed $10,000 in aggregate at any point in the year, as FinCEN's foreign bank account reporting page explains. Additionally, Form 8938 under FATCA applies to taxpayers living abroad above $200,000 at year end or $300,000 at any time for single filers, doubled for joint filers. Your UK accounts and the Jersey custodian appear on these forms. A US brokerage account does not.
Notably, HMRC's guidance says that arrangements to avoid FATCA reporting are not reportable under the UK mandatory disclosure rules. Instead, HMRC may counteract them under regulation 23 of the UK's International Tax Compliance Regulations 2015, which treats the arrangement as if it had not been entered into, while the IRS polices its own side through the FATCA framework. In other words, the mandatory disclosure rules protect HMRC's view of you, not the IRS's.
The UK Reporting Layer
On the UK side, Self Assessment remains the place where income and gains are taxed. Since 6 April 2025 the remittance basis has gone. Long-term UK residents now pay tax on worldwide income and gains as they arise, as GOV.UK's guidance on tax on foreign income confirms. Consequently, an American who has been here more than four years cannot shelter US portfolio income from UK tax simply by leaving it in America.
Correcting Missed Reporting
If you have missed both the disclosure return and the related income, fix them together. HMRC's Worldwide Disclosure Facility is the route for undeclared offshore income and gains, and the overdue MDR return goes separately through the dedicated service. On the US side, missed FBARs or missed US tax returns follow their own correction routes, which our FBAR and FATCA compliance team handles. Furthermore, if a UK adviser sold the arrangement, read our guide to the enablers penalty for UK planning used by US filers, because separate penalties may fall on them.
The UK disclosure of tax avoidance schemes regime is a different code again. Our article on DOTAS scheme numbers and Form 8886 explains where that regime overlaps with US reportable transaction rules. For a professional-body overview of the UK framework, the ICAEW summary of mandatory disclosure rules and DAC 6 is a useful companion.
How TaxYork Can Help
TaxYork provides comprehensive US and UK tax preparation and compliance for high-net-worth Americans, investors and company owners in Britain. For the mandatory disclosure rules, that means reviewing every account move and entity since June 2018, deciding whether each one is reportable, and preparing and filing the HMRC return where the duty is yours.
We then align that work with your Self Assessment, Form 1040, FBAR and Form 8938, so all four returns tell HMRC and the IRS the same story. Where income has gone unreported, we prepare the Worldwide Disclosure Facility submission and the matching US corrections. Our tax treaty optimisation service then makes sure foreign tax credits work across both returns.
Conclusion: Report the Step, Not Just the Income
The mandatory disclosure rules are easy to overlook because they say nothing about how much tax you owe. Instead, they ask whether you have reduced what HMRC can see. For an American in Britain, the gap between CRS and FATCA makes that question unusually live, and the 2026 removal of US company ownership filings makes it sharper still.
The practical lesson is to test every transatlantic restructuring before the first step, keep evidence of your commercial reasons, and diary the 30-day deadline if no UK adviser will report. If you have already moved assets or formed an entity, a prompt voluntary filing costs far less than an HMRC enquiry.
Contact Us
If you have moved investments to the United States, hold assets through a US LLC, or are unsure whether the mandatory disclosure rules apply to you, our team can review your position and prepare every return required. Please book a consultation with our US-UK specialists, email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information about UK and US tax and reporting rules as understood in November 2026 and does not constitute legal or tax advice for your specific circumstances. The worked example is illustrative, and its figures and outcomes are not a prediction of any result. The application of the mandatory disclosure rules depends on the full facts of each arrangement, and HMRC's interpretation may change. Please consult a qualified professional before acting, and refer to HMRC and the IRS for official guidance.