Figures relate to tax year 2025-26 (UK) · 2025 (US)
You paid £50,000 of your own money into your own British company and wrote it up as a director loan. It was the least dramatic transaction of the year.
Your American return disagrees. Moving cash into a company incorporated outside the United States is a transfer of property to a foreign corporation, and Form 926 is how you disclose it. The penalty is a percentage of what you moved.
Key takeaways
- A director loan into your own British company can be reportable.
- Cash counts as property here, so no physical asset needs to change hands.
- Payments across twelve months combine, so small transfers add up.
- Form 926 reports a transfer of cash or property to a foreign company.
- The penalty runs to 10% of the value transferred, with a cap in most cases.
- Missing it can keep the assessment window open on that year.
Does funding your own company count?
It commonly does, and this is the situation we meet most. An American founder incorporating a British company and putting working capital into it has transferred cash to a foreign corporation, whatever label the bookkeeping gave it.
The label on your bookkeeping does not decide the answer.
Our guide to Form 5471 categories covers the annual reporting that usually follows.
Is a loan treated the same as share capital?
Often, because the rules look at cash moving to the company rather than the legal form it takes. A director loan account credited with your own money can be just as reportable as shares issued for the same amount, which surprises founders who kept everything as a loan deliberately.
Repaying the loan later does not undo the reporting for the year it went in.
Document what each payment was and when it happened.
A worked example
The figures below are illustrative and use round numbers to show the mechanics.
Jonathan, an American living in Manchester, incorporates a British company in March and pays in £120,000 across the year to fund stock and salaries. He owns all the shares.
Each payment felt like an internal transfer. Added together they pass the threshold comfortably, so the year's return needs the form.
He also needs the annual foreign company reporting from that year onwards. Two forms, one company, and neither of them charges tax by itself.
What if a spouse owns part of the company?
The analysis runs per person, so an American spouse reports their own transfers and a British spouse reports nothing. Who actually paid the money matters more than whose name appears on the share register.
Joint accounts make that harder to establish later.
Pay from a personal account where you can. It settles the question in one line on a statement.
Keep a simple note of the source of each payment.
Does it apply to a dormant company?
It can, because the test looks at the transfer rather than the trading. A company formed and funded but never traded still received the money, and the reporting follows the payment into it.
Plenty of dormant companies sit unreported for exactly this reason.
Shelf companies bought ready-made behave the same way. The purchase price and any funding both count.
Closing the company later does not clear the earlier year.
Does the currency you paid in matter?
Only for the conversion. Paying in pounds or dollars makes no difference to whether the form applies, but every figure on it appears in dollars at the rate on the day the money moved.
Several payments across a year mean several rates.
Record the rate with each payment rather than averaging at year end.
What value do you report?
Cash reports at the amount that moved, converted on the day. Other property reports at fair market value on the transfer date, and that figure needs support rather than a guess, particularly for goodwill or equipment with no obvious price.
A short valuation note written at the time is worth a great deal later.
Reconstructing a value three years afterwards rarely convinces anybody.
When does a transfer become reportable?
Form 926 applies broadly when an American transfers cash above a threshold to a foreign company they control, or transfers other property in exchange for shares. The cash threshold looks at the twelve months up to the transfer, so several smaller payments can combine into one reportable amount.
Ownership after the transfer matters as well as the amount.
That combination catches far more company formations than people expect.
Does it apply to a company you do not control?
Sometimes. The rules look at your ownership immediately after the transfer, so a minority investor can fall outside the cash reporting while a founder with the same payment falls squarely inside it. The percentage matters as much as the amount.
Contributing property for shares can still be reportable at lower ownership levels.
So check both tests rather than only the percentage.
What is Form 926?
It is an information return reporting a transfer of cash or property by an American person to a foreign corporation. It reports the transfer rather than calculating tax, and it sits with your personal return for the year. Per IRS guidance, Form 926 asks you to describe both the transferor and the property.
Form 926 works out no tax at all.
So it is disclosure, in the same family as the other international forms.
What is the penalty for missing it?
Ten per cent of the value transferred, subject to a cap in most ordinary cases, and no cap where somebody failed deliberately. That is a substantial figure against a company formation, and it applies even though no tax was ever due on the transfer.
Reasonable cause can relieve it, with a proper explanation.
The wider risk is the open assessment window on that year.
Common transfers and how they are treated
| Transfer | Usually reportable? | Note |
|---|---|---|
| Share capital on incorporation | Often | Depends on the amount and ownership |
| Director loan into the company | Often | Cash counts as property |
| Several small payments in a year | Often | Amounts combine over twelve months |
| Equipment contributed for shares | Yes | Value at transfer applies |
| Intellectual property contributed | Yes | Special rules can apply |
| Ordinary trading payment to a supplier | No | Not a transfer to your own company |
What about transferring a business into a company?
That is squarely within the rules. Moving goodwill, equipment or contracts from a sole trade into a limited company in exchange for shares is a transfer of property, and intellectual property carries its own particular treatment on top.
Britain offers reliefs on the same transaction that America does not mirror.
Our guide to incorporation relief and US tax covers that mismatch.
Does the UK side care?
Not about this form. HMRC has no equivalent requirement and no interest in Form 926, so the obligation runs one way only. Your British filings carry on exactly as they would for any other director.
That is precisely why it goes unnoticed.
British accountants have no reason to raise it.
How to work out whether you need it
- List every payment you made into the company during the year.
- Include loans, share subscriptions and expenses you paid personally.
- Convert each to dollars at the rate on the day it moved.
- Add the twelve months up to each transfer to test the threshold.
- Establish your ownership percentage immediately after the transfer.
- Value any non-cash property transferred at the date it moved.
- Attach the form to that year's personal return and keep the workings.
How does it fit with the other forms?
Form 926 reports the moment of transfer, while the annual company reporting covers every year afterwards. One is a snapshot and the other is a film, and an American owner of a British company often needs both in the first year.
The fund rules can apply as a third layer where the company holds mostly cash.
Our guide to US citizens on a UK cap table sets out how those interact.
Does an American company transferring abroad count?
Yes. The rules apply to American corporations and partnerships as well as individuals, so a US company funding a British subsidiary reports in much the same way. The group structure does not remove the requirement.
Group finance teams often assume intercompany funding is invisible.
It is not, and the penalty scales with the amounts involved.
Is there any exception worth knowing?
A few narrow ones exist, mostly for particular categories of property and particular structures. None of them helps an ordinary founder putting cash into a company they own, so treat them as specialist territory rather than a general escape route.
Do not plan around an exception without checking it against your facts.
The general rule catches most small business situations.
When is the form due?
With the return for the year of the transfer, including any extension you take. It is not a separate filing with its own deadline, which is part of why it slips through when a return is prepared in a hurry.
Extensions move it along with everything else.
Flag the transfer to whoever prepares the return, early.
What if the company later fails?
The reporting for the transfer year still stands. A company that never traded, or one that closed two years later, does not undo the disclosure that was due when the money went in.
Any loss relief is a separate question entirely.
So deal with the reporting first and the loss afterwards.
How long should you keep the records?
Longer than usual, because a missing form can leave the year open indefinitely. Keep the bank evidence, the valuation notes and the company paperwork for as long as you hold the shares.
Add the incorporation documents to the same file.
A buyer doing diligence will ask for exactly this bundle.
What if you already missed it?
File Form 926 with an amended return and a reasonable cause explanation. Coming forward before anyone asks improves the position considerably, and the argument grows stronger where you avoided no tax and reported the company properly in other respects.
Check whether the annual company forms were also missed.
Our guide to amending a US tax return covers the process.
Mistakes and penalties we see with Form 926
The first is treating a director loan as invisible. Cash into the company is cash into the company.
The second is looking at single payments rather than the twelve month total.
The third is assuming a British accountant would have mentioned it. They have no reason to.
The fourth is filing the annual company form and stopping there. The transfer year needs both.
How US UK Tax Accountants helps
We go through the money that went into your company, test each transfer against the threshold and the ownership rules, and prepare the disclosure with valuations that stand up. Then we line it up with the annual reporting that follows.
Where earlier years went unreported, we handle the catch-up. Our US federal return service covers the filings.
If you have funded a British company and you file in America, get in touch. This one is cheap to fix early and expensive to find late.
Last reviewed 28 September 2026. This article is general information and not personal tax advice. Every transfer turns on its own facts, so take advice on yours before filing.
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Official guidance from the IRS, FinCEN and GOV.UK. Thresholds and rates on those pages are updated annually — check the current tax year before relying on a figure.
