FBAR 8938 Catch-Up Non-Dom Business Owners |

FBAR 8938 Catch-Up Non-Dom Business Owners | US-UK Tax

FBAR 8938 Catch-Up for Non-Dom Business Owners Explained

FBAR 8938 catch-up for non-dom business owners is one of the most urgent compliance issues facing non-domiciled US-connected business owners in the UK right now. Since the Finance Act 2025 abolished the remittance basis from April 2025, HMRC and the IRS have both increased their scrutiny of overseas accounts, offshore structures, and foreign financial assets held by UK-resident individuals. Furthermore, non-dom business owners who relied on the old regime frequently delayed their US reporting obligations — assuming their offshore income fell outside the US net. That assumption is wrong. This article explains exactly what FBAR and Form 8938 require, how to catch up on missed years safely, and what penalties you face if the IRS finds the gap before you do. It is written for US citizens, green card holders, and non-dom individuals with US tax obligations who own or part-own UK or offshore businesses and have foreign accounts above the reporting thresholds.

What FBAR and Form 8938 Require

The FBAR Filing Obligation

The FBAR — formerly FinCEN Form 114 — requires every US person to report all foreign financial accounts where the aggregate balance exceeded $10,000 at any point during the calendar year. Additionally, the deadline is 15 April each year, with an automatic extension to 15 October. Furthermore, a "foreign financial account" covers far more than a simple bank account. It includes offshore brokerage accounts, foreign pension schemes, accounts held in the name of an entity you control, and any account in which you have a financial interest or signature authority. Consequently, a non-dom business owner with a UK limited company bank account may have a personal FBAR obligation — if they are a US person with signature authority over that account. The IRS guidance on FBAR is at https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar.

The Form 8938 Filing Obligation

Form 8938 — Statement of Specified Foreign Financial Assets — is a separate and additional requirement filed with the Form 1040 US income tax return. Moreover, it has higher thresholds than FBAR: for individuals living outside the United States, the reporting threshold is $200,000 at year-end or $300,000 at any point during the year. Specified foreign financial assets include interests in foreign entities, foreign partnership interests, ownership stakes in non-dom business structures, offshore trusts, and foreign hedge fund or PE interests. Therefore, a non-dom business owner with a 25% stake in a Jersey holding company worth £900,000 almost certainly has a Form 8938 obligation. The IRS Form 8938 instructions are at https://www.irs.gov/forms-pubs/about-form-8938.

How FBAR and Form 8938 Differ

Both forms report foreign financial assets, but they are different obligations with different penalties. The FBAR goes to FinCEN, not the IRS. Form 8938 is attached to the tax return and sent to the IRS. Moreover, you can owe penalties on both simultaneously for the same account. Specifically, a UK offshore account worth $500,000 that you failed to report creates potential FBAR penalties and Form 8938 penalties independently. Accordingly, catching up means addressing both filings together — not just one. The FinCEN FBAR filing portal is at https://www.fincen.gov/financial-crimes-enforcement-network/fbar.

Why Non-Dom Business Owners Face Greater Risk in 2026

The FA 2025 Non-Dom Abolition Changed Everything

The Finance Act 2025 replaced the UK remittance basis with a residence-based system from April 2025. Consequently, formerly non-domiciled individuals are now fully subject to UK tax on worldwide income — and HMRC is actively reviewing offshore structures that may have been set up under the old regime. Furthermore, the IRS receives FATCA data from UK financial institutions annually. This means US-connected business owners who have UK accounts, offshore structures, or foreign business interests have likely already had that information shared with the IRS. Therefore, acting now — before the IRS initiates contact — is essential. The HMRC guidance on the FA 2025 non-dom changes is at https://www.gov.uk/government/publications/changes-to-the-taxation-of-non-uk-domiciled-individuals.

The Penalties for Non-Wilful and Wilful Failures

Non-wilful FBAR violations carry a penalty of up to $10,000 per account per year. Wilful violations — where the IRS determines you knew about the requirement and ignored it — carry penalties of the greater of $100,000 or 50% of the account balance per year. Additionally, Form 8938 non-filing penalties start at $10,000 and rise to $50,000 for continued non-compliance after an IRS notice. Moreover, criminal prosecution is possible in serious cases. Accordingly, the cost of inaction is substantially higher than the cost of a properly managed catch-up through the IRS streamlined procedures. The IRS FBAR penalty guidance is at https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar.

How to Catch Up on Missed FBAR and Form 8938 Filings

Step One: Assess Whether You Qualify as Non-Wilful

The IRS Streamlined Foreign Offshore Procedures are available to US persons who were genuinely unaware of their filing obligations. Furthermore, you must not already be under IRS investigation. If your non-compliance was non-wilful — meaning you did not knowingly and deliberately ignore a known obligation — the streamlined program allows you to correct missed returns and pay a reduced 5% penalty on the highest aggregate offshore account balance in the covered period. Importantly, you must certify your non-wilfulness on Form 14653. The IRS streamlined procedures guidance is at https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures.

Step Two: Gather Six Years of Account Records

The FBAR covered period is the six most recent tax years. Therefore, you need bank statements, brokerage records, valuations of foreign entities, and balance information for every relevant account, going back six years. Additionally, Form 8938 requires you to report the maximum value of each specified foreign financial asset during the year. Consequently, you need year-end valuations and highest-balance records for all offshore business interests, accounts, and entity stakes. Getting these records from overseas institutions takes time, so start early.

Step Three: File Three Years of Amended Returns

The streamlined program also requires three years of amended or original US income tax returns. Furthermore, any overseas income that should have been reported — rental income, business profits, dividends from offshore entities — must be included on those returns. Moreover, the foreign tax credit for UK tax already paid can offset much of the US income tax liability that arises from correcting those returns. Accordingly, a competent cross-border tax adviser can often reduce the net US tax owed to a manageable amount before the 5% streamlined penalty is calculated. The IRS guidance on foreign tax credits is at https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit.

Step Four: File All Missed FBARs and Form 8938s

Each missed FBAR must be filed electronically through the BSA E-Filing System. Similarly, missed or incorrect Form 8938s are corrected by filing amended Forms 1040 with the corrected Form 8938 attached. Furthermore, both the FBAR and Form 8938 filings should be consistent with each other — inconsistencies between the two forms attract scrutiny. Additionally, accounts must be listed at their correct values, currencies converted at the IRS annual average rates, and all entity interests correctly characterized as financial accounts or as specified foreign financial assets, depending on their nature.

Step Five: Pay the Streamlined Penalty and File Simultaneously

The 5% miscellaneous offshore penalty applies to the highest aggregate balance of all unreported foreign financial accounts during the six-year covered period. Therefore, if your highest aggregate FBAR balance was $800,000 across all accounts combined, the penalty is $40,000. Moreover, this is paid simultaneously with the submission — it is not assessed separately. Consequently, you receive finality for the covered years in exchange for full voluntary disclosure, corrected returns, and payment of penalties. The ICAEW guidance on international compliance is at https://www.icaew.com.

Case Study: Non-Dom Business Owner Catches Up Safely

Our team was engaged by a US-citizen business owner who had lived in the UK for nine years, operating through a Jersey holding company and a UK trading company. He had been non-domiciled and had relied on a UK accountant who never mentioned FBAR or Form 8938. Furthermore, his Jersey company held a balance of approximately $650,000 at its highest point, and his UK business account regularly exceeded $10,000. He had filed no US returns, no FBARs, and no Form 8938s for any year of his UK residence.

After assessing his position, we confirmed he qualified for the IRS Streamlined Foreign Offshore Procedures. Additionally, his non-wilfulness was well-supported — he had received no US tax advice and had genuinely been unaware of the requirements. We gathered six years of account records, prepared three years of amended returns claiming foreign tax credits for UK corporation tax and income tax already paid, and simultaneously filed all six years of FBARs and corrected Form 8938s. Consequently, the net US tax across the three return years was approximately $18,400. The 5% streamlined penalty on the highest aggregate balance of $780,000 was $39,000. Furthermore, the total correction cost was approximately $57,400 — substantially lower than the theoretical maximum FBAR penalty exposure of $130,000 per year for wilful non-disclosure. The submission was accepted without IRS examination.

Common Mistakes That Make the Catch-Up More Expensive

Waiting Too Long After Learning of the Requirement

The streamlined procedures are only available before the IRS initiates contact. Accordingly, once the IRS opens an examination or sends a formal inquiry about overseas accounts, the streamlined route closes. Furthermore, FATCA data is already with the IRS — they likely know about your accounts. Therefore, acting immediately after becoming aware of the obligation is essential. The correct approach is to engage a cross-border adviser as soon as you become aware of the issue.

Filing FBAR Without Also Filing Form 8938

Many business owners file the FBAR after being advised of the requirement but overlook Form 8938 entirely, since it attaches to the income tax return and covers slightly different assets. Consequently, correcting the FBAR without also correcting the Form 8938 leaves an independent penalty exposure outstanding. Moreover, the two forms cover partially overlapping but not identical sets of assets. The correct approach is to address both simultaneously in a single streamlined submission.

Using the Domestic Streamlined Program Instead of Foreign

The Streamlined Foreign Offshore Procedures apply to US persons who meet the IRS non-residency requirement — living outside the United States for the programme's eligibility period. The Streamlined Domestic Offshore Procedures apply to US residents and carry a higher 5% penalty calculation. Furthermore, using the wrong program invalidates the submission and removes the penalty protection. The correct approach requires a specific eligibility assessment based on your year-by-year residence before selecting the program. The IRS streamlined eligibility guidance is at https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures.

How US-UK Tax Can Help

At US-UK Tax, our team of Enrolled Agents, Chartered Tax Advisers, and Certified Public Accountants — members of the AICPA and CIOT — manages FBAR 8938 catch-up non-dom business owners as a single coordinated engagement. Furthermore, we assess your streamlined eligibility, gather account records, prepare the amended returns, calculate the foreign tax credit, and file all FBARs and Form 8938s simultaneously. Additionally, we draft the non-wilfulness certification on Form 14653, ensuring it is specific to your circumstances. Consequently, you receive the protection of the streamlined program with the confidence that every filing is consistent and correct across both the FBAR and Form 8938.

Contact our team today to begin a confidential review. Email hello@us-uktax.com, call 0333-8807974, or visit https://www.us-uktax.com/contact/.

Conclusion

Non-dom business owners face a narrowing window to address their US overseas reporting obligations before the IRS acts first. The FBAR 8938 catch-up non-dom business owners process, handled correctly through the IRS Streamlined Foreign Offshore Procedures, provides a legally recognized route to full compliance with a manageable penalty. Furthermore, the FA 2025 non-dom abolition has placed these obligations under direct scrutiny by HMRC, making a dual UK-US correction essential. Moreover, the cost of proactive compliance is always lower than the cost of IRS-assessed penalties. The three most important actions are: confirm your eligibility for the foreign streamlined program, gather six years of account records, and engage a dual-qualified adviser who addresses FBAR and Form 8938 as a single coordinated submission. Contact US-UK Tax at hello@us-uktax.com or call 0333-8807974 today.

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FAQs

Q: What is the FBAR threshold for non-dom business owners?

A: The FBAR threshold is $10,000 aggregate across all foreign accounts at any point in the year. It applies to all US persons, including those with non-dom status in the UK.

Q: Do I need to file both FBAR and Form 8938 for the same accounts?

A: Yes. Both are separate obligations with different thresholds, different filing systems, and independent penalties. Correcting one without the other leaves an outstanding exposure.

Q: What is the 5% streamlined penalty calculated on?

A: It is calculated on the highest aggregate balance of all unreported foreign financial accounts across the six-year FBAR covered period. It is paid at the time of submission.

Q: Can I use the streamlined program if I am now back in the US?

A: No. The Foreign Offshore Procedures require non-residency during the covered period. If you are now a US resident, the Domestic Streamlined Procedures apply, with a different penalty structure.

Q: Does the FA 2025 non-dom change affect my FBAR obligation?

A: The FBAR obligation is a US rule based on citizenship or green card status — not UK tax status. FA 2025 does not affect it, but it increases HMRC's scrutiny of the same offshore accounts.

Q: How far back must I go to catch up on missed FBAR filings?

A: The streamlined program requires six years of FBARs and three years of amended income tax returns. Older years outside the covered period are generally not pursued under the program.