A US citizen who owns all the shares of a UK limited company files Form 5471 with their Form 1040 every year, because the company is a controlled foreign corporation. The form is an information return and often adds no tax of its own. Each missed year carries an initial penalty of $10,000, and a missing form leaves the whole return open to assessment.
This article is for US citizens and green card holders who run a contracting, consulting or other small business through their own UK company. It builds on the company section of our guide to US-UK tax for founders, fund managers and executives, and covers the filing categories, the schedules, the records needed, penalties, the entity election and catching up on missed years.
Why is a one-person UK company a controlled foreign corporation
The US treats a UK private limited company as a foreign corporation unless an election says otherwise. A US person owning ten per cent or more is a US shareholder, and a company more than half owned by US shareholders is a controlled foreign corporation. A sole US owner meets both tests alone.
The size of the company is irrelevant. There is no exemption for low turnover, for a company with one client, or for a year in which the company made a loss or paid its owner nothing. Ownership is also traced through other entities and attributed between certain family members, so shares placed in the name of a holding company or a relative do not necessarily take the owner out of the rules.
Form 5471 is not sent in separately. It is attached to the owner's income tax return and takes the same due date and extensions: 15 April, automatically 15 June for a filer living outside the US, and 15 October with an extension. A late Form 1040 therefore means a late Form 5471.
Which Form 5471 filing categories apply to a sole owner
A sole US owner normally files each year in category 4, as a US person who controls the company, and in category 5, as a US shareholder of a controlled foreign corporation. Category 3 is added for a year in which the owner acquires or disposes of shares across the ten per cent line.
The categories matter because the Instructions for Form 5471 (opens the official IRS page in a new tab) use them to decide which schedules are required. A person in more than one category completes every schedule required by any of them, once. Category 2 concerns US citizens and residents who are officers or directors when a US person acquires a ten per cent holding, so it can also be relevant in the year the company is formed.
Consider a US citizen living in Leeds who forms a UK company for her design consultancy and takes the one share issued. For the year of incorporation she reports the acquisition as well as the annual schedules. In each later year she files as the controlling shareholder of a controlled foreign corporation. If her British husband later takes half the shares, the categories are tested again, because ownership can be attributed between spouses in some cases and not in others.
What do the Form 5471 schedules ask for
The schedules restate the company's year for a US reader. They ask for an income statement and balance sheet prepared under US accounting principles, the company's earnings and profits as US tax law measures them, its dealings with its owner, and the income that falls within the Subpart F and tested income rules.
For a company with one owner and one line of business, most schedules are short, but each must agree with the others and with the owner's Form 1040. The figures on the tested income schedule feed the owner's computation of net CFC tested income, formerly GILTI. That regime was amended by 2025 legislation with effect for tax years beginning after 31 December 2025, so a form prepared on last year's template needs checking against the current Form 5471 (opens the official IRS page in a new tab) and its schedules.
- Schedule C: the income statement, in the company's functional currency with a US dollar translation
- Schedule F: the balance sheet at the start and end of the year, in US dollars
- Schedules H, J and P: current earnings and profits, the accumulated total, and the part already taxed in the US
- Schedule M: transactions between the company and its owner, such as salary, dividends, loans and expenses
- Schedules I, I-1 and Q: Subpart F income and the tested income information, by category
- Schedules E and G: foreign taxes paid or accrued, and a set of yes or no questions about the company
What do the UK accounts supply and what is missing
UK statutory accounts supply the starting figures: turnover, expenses, corporation tax and the balance sheet in sterling. They do not supply US-basis adjustments, dollar translations, earnings and profits or a breakdown of transactions with the owner. Those are prepared separately from the company's detailed records.
The version filed at Companies House is often a filleted or micro-entity set with no profit and loss account, so the preparer needs the full accounts and the trial balance behind them. The company's accounts and Company Tax Return (opens the official GOV.UK page in a new tab) follow UK standards and UK tax law. Earnings and profits is a US tax measure, and items such as depreciation are treated differently from UK capital allowances. Our financial statements service produces the US-basis figures from the UK ledgers.
The accounting period can differ as well. US law generally requires a controlled foreign corporation to use the tax year of its majority US shareholder, which for an individual is the calendar year, and 2025 legislation removed an election to use a year ending one month earlier. A company with a 31 March year end may therefore need its figures re-cut to 31 December for the form.
- Full accounts, trial balance and nominal ledger for the period
- Corporation tax computation and proof of tax paid
- Director's loan account, payroll summaries and dividend vouchers
- Share register and any changes in ownership during the year
What does a missed Form 5471 cost
The initial penalty is $10,000 for each form for each year. Further penalties can follow if the form is still missing after the IRS sends notice, and foreign tax credits can be reduced. Separately, the period in which the IRS can assess tax stays open until the information is supplied.
That second consequence is easy to overlook. An ordinary return becomes closed to assessment after a fixed period. Where a required Form 5471 has not been filed, that period does not expire until a set time after the information is supplied, and it can stay open for the whole return and not only for items connected with the company. A reasonable cause defence exists, and whether it succeeds depends on the facts.
A company that has stopped trading or never started still has a filing duty while the US person owns it. The instructions describe a summary procedure for a dormant foreign corporation, under which only the first page of the form is completed. The IRS definition of dormant has its own conditions and is not the Companies House definition, so a company with a bank balance and a few transactions may need the full form.
Can you elect to treat the company as disregarded instead
A UK private limited company is eligible to elect its US classification. With one owner it can elect to be a disregarded entity, so that the US treats its income and assets as the owner's own. Form 5471 is then replaced by Form 8858. It is an option to review, with real trade-offs.
The election takes the company out of the controlled foreign corporation rules and generally lets the owner credit UK corporation tax as tax on their own income. In exchange, all profit is taxed on the owner as it is earned, and Form 8858 is due each year, as the IRS page for Form 8858 (opens the official IRS page in a new tab) sets out. Nothing changes in the UK, where the company still pays corporation tax and its dividends are still taxed on the shareholder.
Two further points need working through. An owner treated as carrying on the business personally has to consider US self-employment tax at 15.3% and the cover given by the totalization agreement. An election for an established company is treated as a liquidation, which can produce a US gain, and a classification once chosen generally cannot be changed again for a period of years. Our business incorporation service reviews the choice when a company is formed, when the election is cheapest.
How do you catch up on missed Forms 5471
The IRS has two established routes. Where no tax was underpaid, the delinquent international information return procedures are the usual one. Where income also went unreported and the failure was non-wilful, the streamlined procedures may fit. Neither guarantees that penalties will not be charged.
The delinquent international information return submission procedures (opens the official IRS page in a new tab) are open to a taxpayer who is not under examination or investigation and has not already been contacted about the missing forms. Each late Form 5471 is attached to an amended return for its year. A reasonable cause statement can be attached, but the IRS says penalties may be assessed during processing without considering it, so a later response to correspondence may be needed.
The streamlined filing compliance procedures (opens the official IRS page in a new tab) cover three years of returns, including the information returns, and six years of FBARs. Both routes require non-wilful conduct, certified in writing, and neither is available once an examination has begun. Only the Foreign route is penalty-free, and the Domestic route carries a 5% penalty. Our article on the streamlined routes for those behind on US returns explains the difference, and our business tax returns service prepares the forms. The founders, fund managers and executives guide covers what follows once the filings are current.
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
