Bookkeeping & Accounting
Form 5471, Form 5472, Form 8858
Bookkeeping kept to a standard that feeds a UK corporation tax return and US Forms 5471 or 5472 without rebuilding the figures later.
What does Bookkeeping & Accounting involve?
Books kept only for HMRC usually lack what the IRS forms ask for. Forms 5471 and 5472 want related-party transactions separated, balances in dollars and a view of accumulated earnings under US rules. We set up the ledger so both countries' returns can be produced from the same records.
Forms and filings involved
- Form 5471
The information return a US citizen or green card holder files for a UK limited company they own, control or have acquired an interest in.
- Form 5472
Reporting for US corporations with a significant foreign owner, and for single-member US LLCs owned by someone outside the US.
- Form 8858
The information return for a foreign entity the IRS disregards, or a foreign branch, such as a UK operation of a US business.
One ledger for two sets of returns
A UK company prepares statutory accounts under UK accounting standards and files a corporation tax return based on them.
If a US person owns or controls the company, the same figures also appear on Form 5471, which asks for an income statement and balance sheet translated into dollars and adjusted towards US accounting principles. The work is far easier when the chart of accounts anticipates those schedules than when a year of transactions has to be re-coded after the accounts are signed.
Related-party transactions are the usual gap. Forms 5471 and 5472 each ask for amounts paid to and received from connected persons, broken down by type: sales, services, rents, royalties, interest, loans and capital contributions. A director's loan account that mixes salary, expenses and personal spending cannot be split reliably after the event. We tag each intercompany and shareholder entry as it is posted, so the totals reported to the IRS agree with the UK accounts and with the other company's books.
Currency is handled once and consistently. A UK company normally keeps its books in sterling, and the US forms translate the figures using methods that differ between the income statement, the balance sheet and distributions. A US subsidiary of a UK group keeps dollar books but reports into sterling group accounts. We record the rate source and method in the file so the same approach is applied each year, and so an examiner can follow how each dollar figure was reached.
How the books are set up
- 01
- Chart of accounts mapped to the Form 5471 income and balance sheet lines
- 02
- Intercompany and shareholder transactions tagged by type as they are posted
- 03
- Director's loan account kept separate from payroll and expense claims
- 04
- Monthly reconciliation of intercompany balances with the other company's ledger
- 05
- Documented exchange rate method applied the same way every year
Who this is for
UK limited companies with a US shareholder or US director
- US subsidiaries of UK parent companies reporting into group accounts
- UK-owned US LLCs that must file Form 5472 each year
- Owners who have been rebuilding figures at the tax return deadline
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
Can my UK accountant's year-end accounts be used for my Form 5471?
They are the starting point, but rarely enough on their own. Form 5471 needs the figures in dollars, adjusted towards US accounting principles, and broken down in ways UK accounts do not show, including related-party transactions by category and a computation of earnings and profits. Where the underlying bookkeeping already separates those items, the conversion is mechanical. Where it does not, the transactions have to be reviewed again, which is slower and less reliable.
What counts as a related-party transaction for the IRS forms?
Broadly, any dealing between the company and a person connected to it by ownership: shareholders, companies in the same group, and certain relatives or entities they control. Sales, fees, rent, interest, loans in either direction, and capital put in or taken out all count. Exactly which schedule an amount goes on, and in how much detail, depends on the form and on the filer's category.
Does my UK company have to keep its books in dollars?
No. A UK company normally keeps its accounting records in sterling, which is also what HMRC expects, and sterling is usually its functional currency for US purposes too. The US forms then translate the figures into dollars using prescribed methods. What matters is that the translation is done on a consistent basis and the rates used can be traced, so the dollar figures reported each year reconcile to the sterling accounts.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
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