Are shares in my own UK limited company reportable on Form 8938?

Yes, once you meet the reporting threshold. The IRS instructions for Form 8938 list stock or securities issued by someone who is not a US person, and any interest in a foreign entity, among the specified foreign financial assets held for investment outside a financial account. Ordinary shares in a UK limited company meet both descriptions. It makes no difference that the company is closely held, that you founded it, that you are its only director, or that the shares have never been sold.

Do I report my UK company shares on the FBAR as well?

Generally no. The IRS comparison of Form 8938 and FBAR requirements states that foreign stock or securities not held in a financial account are reportable on Form 8938 and not reportable on the FBAR, because a share register is not a foreign financial account. The reverse can apply to the company's own bank account: the IRS notes that an indirect interest in foreign financial assets held through an entity is not a Form 8938 item, but can be an FBAR item where you hold a greater than 50 percent interest in the entity.

I file Form 5471 for my UK company. Do I still need Form 8938?

Very probably yes. The regulations eliminate duplicative reporting for an asset reported on a timely filed Form 5471, but they require you to report on Form 8938 the fact that the form was filed and how many were filed, which is done in Part IV, Excepted Specified Foreign Financial Assets. For specified individuals the value of the excepted asset still counts towards the aggregate tested against your reporting threshold, and the exception does not cover assets that are not on the Form 5471, such as a director's loan account or a personal UK bank account.

How do I value my private UK company shares if there is no market price?

You report a reasonable estimate of the highest fair market value of the asset during the tax year. The IRS explanation of the section 6038D regulations confirms that a third-party appraisal is not required. The instructions allow value to be determined from information publicly available from reliable financial information sources or other verifiable sources, and allow the last day of the tax year value to be used unless you know, or have reason to know from readily accessible information, that it is not a reasonable estimate of the maximum value. A recent priced round, a valuation prepared for an EMI grant, or net asset value from the statutory accounts are all defensible starting points when documented.

Do unexercised EMI options and my director's loan account have to be reported?

Both need to be assessed rather than assumed away. A director's loan account credit balance owed to you by the UK company answers the description of a note, bond, debenture or other form of indebtedness issued by a foreign person, which the instructions list as a reportable asset. Unexercised share options fall within the category of an option or other derivative instrument entered into with a foreign counterparty or issuer, so EMI and similar options over shares in your UK company should be tested against the definition each year. An overdrawn director's loan account, where you owe the company, is not your asset and is not reported by you.

What are the penalties if I have missed Form 8938 for several years?

The instructions set a 10,000 US dollar penalty for failing to file a complete and correct Form 8938 by the due date including extensions, with a further 10,000 US dollars for each 30-day period or part period beginning 90 days after the IRS mails a notice of the failure, capped at 50,000 US dollars in continuing penalties. An underpayment arising from a transaction involving an undisclosed specified foreign financial asset attracts a 40 percent accuracy-related penalty. No penalty applies where the failure is due to reasonable cause and not willful neglect. Separately, the assessment period stays open until three years after Form 8938 is actually filed, so old years do not close while the form is outstanding.

Form 8938 Reporting for US Founders With UK Shares

Form 8938 reporting for US founders begins with a fact that surprises almost everyone who hears it: the shares you hold in your own UK limited company are a specified foreign financial asset. They are not a bank account. They produce no statements. They may never have paid you a dividend. They will not appear on your FBAR. And they still belong on Form 8938, Statement of Specified Foreign Financial Assets, once the total value of your specified foreign financial assets crosses the threshold that applies to you.

In practice that single asset is the most frequently omitted item on the whole form. The pattern is the one that produces a missed reporting investment account: nothing was concealed and no tax was avoided, the asset simply never occurred to anyone as something a form could be asking about. Founders think of their equity as their company, not as a financial asset. The Code does not share that intuition, and the Form 8938 penalty regime does not require any tax to be due before it applies.

What is a specified foreign financial asset, and do UK company shares count?

A specified foreign financial asset is either a financial account maintained by a foreign financial institution, or a foreign financial asset held for investment that is not held in an account at a financial institution. The second category captures founder equity, and the IRS instructions for Form 8938 set it out plainly. Reportable assets in that category include the following.

Stock or securities issued by someone who is not a US person, which the instructions illustrate with stock issued by a foreign corporation.
Any interest in a foreign entity.
A note, bond, debenture or other form of indebtedness issued by a foreign person.
A financial instrument or contract held for investment that has an issuer or counterparty which is other than a US person.
An option or other derivative instrument with respect to any of those items, or with respect to a currency or commodity, entered into with a foreign counterparty or issuer.

Read those five lines against a typical founder position and the answer is not close. Your ordinary shares are stock issued by a person who is not a US person. Your shareholding is an interest in a foreign entity. A director's loan account the company owes you is indebtedness issued by a foreign person. The instructions add that the examples given do not comprise an exclusive list, so the absence of a line saying founder equity is no argument that founder equity sits outside the rules. It sits inside them twice over.

Why is founder equity the most commonly missed Form 8938 asset?

Because every practical signal that normally prompts disclosure is absent. Foreign asset reporting failures are usually failures of prompting rather than of honesty, and private company shares remove every prompt at once.

There is no statement. Banks and brokers send annual summaries in January; a share register sends nothing.
There is no cash. Nothing was received in the year, so nothing feels reportable.
There is no FBAR entry, and founders who file the FBAR conscientiously assume the two forms cover the same ground.
There is no market price, and the absence of an obvious number invites the conclusion that there is nothing to report.
The shares were often subscribed for a nominal sum. A subscription at one penny a share does not feel like a six-figure asset three rounds later, but the test looks at value now, not cost then.
The preparer never sees the cap table. A return built from bank statements and payroll data cannot surface an asset that appears in neither.

The result is a return that is complete in every respect the founder can see, and incomplete in the one respect the IRS looks at first once a foreign company appears anywhere in the file.

My shares are my business, not an investment. Does that change anything?

No, and here the regulations are unusually direct. The second category applies to assets held for investment, and the Treasury regulations under section 6038D define an asset as held for investment if it is not used in, or held for use in, the conduct of a trade or business. Founders reasonably assume their shares fail that test, because the company plainly is a trade or business and they work in it full time.

The regulations close that door explicitly. In setting out how the trade or business test is applied, they state that stock is never considered used or held for use in a trade or business for purposes of applying the test. Whatever the company does, the shares themselves are held for investment. There is no active business exception and no working shareholder exception. Someone who owns 100 percent of a trading UK company and runs it daily is in the same reporting position as a passive minority investor who has never set foot in the office.

Do UK company shares go on the FBAR as well as Form 8938?

Generally no, and that divergence is why so many founders file one form correctly and the other incompletely. The IRS comparison of Form 8938 and FBAR requirements addresses this asset type directly: foreign stock or securities not held in a financial account are reportable on Form 8938 and are not reportable on the FBAR. Foreign stock held inside a foreign financial account is different again, because there the account itself is reported and its contents are not separately listed.

The reason is structural. The FBAR reports foreign financial accounts, and a UK company share register is not one. There is no institution, no account number, no custodian and no balance to convert. The share certificate in your desk drawer is invisible to FinCEN Form 114 and highly visible to Form 8938.

The trap also runs the other way, and it catches founders who have grasped the first half of the rule. The same IRS comparison confirms that indirect interests in foreign financial assets held through an entity are not reported on Form 8938, but that the FBAR does reach them where the US person holds sufficient ownership, which the IRS describes as a greater than 50 percent interest in the entity. A founder who owns more than half of a UK limited company therefore generally keeps the company's UK business bank account off Form 8938, yet may have to report that same account on their own FBAR. On this pair of assets the two forms are close to inverses.

Your ordinary shares in the UK company: Form 8938 yes, FBAR no.
The company's own UK business bank account: FBAR yes where your interest exceeds 50 percent, Form 8938 no, being an indirect interest held through an entity.
Your personal UK current account: both forms, subject to each form's own threshold.
A director's loan account credit balance owed to you: Form 8938 yes, as indebtedness issued by a foreign person, FBAR no.

How do you value unlisted UK company shares for Form 8938?

Form 8938 asks for the maximum value of each asset during the tax year, which is simple for a bank account and awkward for shares that have never traded. The regulations under section 6038D anticipate this. They require a reasonable estimate of the highest fair market value of the asset during the tax year and, critically, the IRS explanation of those regulations confirms they do not require a specified person to obtain an appraisal by a third party in order to reasonably estimate that value.

The instructions then allow a practical shortcut. For an asset not held in a financial account you may determine fair market value from information publicly available from reliable financial information sources or from other verifiable sources, and you may use the value as of the last day of the tax year unless you know, or have reason to know based on readily accessible information, that it does not reflect a reasonable estimate of the maximum value during the year. For a private company with no liquidity event in the year, the year-end figure is usually the defensible answer.

The price per share in the company's most recent priced funding round, applied to your holding. This is the strongest basis where a round closed in or near the year.
A valuation already prepared for another purpose in the same period, such as a share valuation agreed with HMRC for an EMI option grant.
Net asset value from the statutory accounts filed at Companies House, where the business has real balance sheet substance and no round has been priced.
The subscription price paid, where the company is early stage, pre-revenue and nothing has moved the value.
A contemporaneous file note recording which basis was chosen, why, and what was reviewed, kept with the return papers.

Two mechanical points matter as much as the valuation. Values are reported in US dollars, and the instructions require the US Treasury Bureau of the Fiscal Service foreign currency exchange rate for purchasing US dollars, applied on the last day of the tax year, even where you disposed of the asset earlier. A sterling figure converted at an average rate or a bank's own rate is a reporting error even where the sterling figure is right. Separately, where the maximum value of an asset is less than zero the instructions direct you to use a value of zero. That matters for founders whose ordinary shares sit behind a large liquidation preference: a zero value does not remove the asset from the form, it is still reported, at zero.

How does filing Form 5471 change Form 8938 reporting for US founders?

This is the interaction that saves founders the most work and causes them the most trouble. Most US founders with a controlling interest in a UK limited company already file Form 5471, Information Return of US Persons With Respect to Certain Foreign Corporations. Where an asset is reported on a timely filed Form 5471, the regulations eliminate duplicative reporting: you do not list that asset again in the detailed asset parts of Form 8938. Instead the regulation requires you to report on Form 8938 the filing of the form on which the asset is reported.

Mechanically that is done in Part IV of Form 8938, headed Excepted Specified Foreign Financial Assets, where you enter the number of Forms 5471 filed for the year. The same part carries lines for the other returns covered by the exception, including Form 8621 for passive foreign investment company interests and Form 8865 for foreign partnerships. Part IV is not optional housekeeping. It is the mechanism by which the exception is claimed, and an asset left off the detailed parts with an empty Part IV is simply an unreported asset.

It does remove the need to list the same shares again in the detailed Form 8938 asset parts for that year.
It does not remove the need to file Form 8938 at all. For specified individuals the value of assets reported on Form 5471 still counts towards the aggregate tested against your threshold, so the shares can push you over and then be excepted from detailed listing.
It does not apply where the Form 5471 was never filed, or was late. The exception is written around a form timely filed with the IRS, so a founder who missed the 5471 has an unreported Form 8938 asset as well as a missing information return.
It does not extend beyond the Form 5471. A director's loan account, a convertible loan note or a personal UK bank account are not on that form and go on Form 8938 in the ordinary way.
It does not eliminate the disclosure. The number of forms filed must appear on the face of Form 8938.

The middle three points are where founders come unstuck. The exception is asset-specific, not company-specific and certainly not taxpayer-specific. Treating a filed Form 5471 as a blanket answer produces a return that looks complete while leaving several assets undisclosed.

What are the Form 8938 reporting thresholds for a founder living in the UK?

The thresholds turn on two axes: whether you live in the United States or abroad, and your filing status. Each is a pair, because the test is met if the aggregate value of your specified foreign financial assets exceeds either the stated amount on the last day of the tax year or a higher amount at any time during the year.

Living in the United States, unmarried or married filing separately: more than 50,000 US dollars on the last day of the tax year, or more than 75,000 US dollars at any time during the year.
Living in the United States, married filing jointly: more than 100,000 US dollars on the last day of the tax year, or more than 150,000 US dollars at any time during the year.
Living abroad, unmarried or married filing separately: more than 200,000 US dollars on the last day of the tax year, or more than 300,000 US dollars at any time during the year.
Living abroad, married filing jointly: more than 400,000 US dollars on the last day of the tax year, or more than 600,000 US dollars at any time during the year.

The higher thresholds apply only if you meet a presence abroad test. The IRS sets out two routes: you are a US citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or you were present in a foreign country or countries at least 330 full days during any period of 12 consecutive months ending in the tax year being reported. Note the timing risk. A founder who relocates to London part-way through a year may not qualify for the higher threshold in that first year, which is very often the year the company was incorporated and the shares issued. The lower 50,000 and 75,000 pair then applies, which a funded company crosses immediately. Because assets reported on Form 5471 still count towards the threshold, and because founder equity revalues sharply at each priced round, the year you first cross is usually the year of a round rather than any year you received cash.

Which other founder assets get missed alongside the shares?

Founder equity is rarely the only omission, because the instruments surrounding a founding shareholding come from the same reportable categories. Each of the following should be assessed annually against the definition rather than assumed to be outside it.

Director's loan account credit balances. Where the company owes you money the balance answers the description of indebtedness issued by a foreign person. Where the account is overdrawn and you owe the company, the balance is the company's asset, not yours.
Convertible loan notes and advance subscription agreements. A loan note issued to you by the UK company is again indebtedness issued by a foreign person, and an instrument that converts into shares is a contract with a non-US issuer.
Unexercised EMI and other UK share options. The instructions list an option or other derivative instrument with a foreign issuer or counterparty among reportable assets, so options over shares in your company should be tested against the definition, not dismissed because they are unvested.
SAFE-style instruments and their UK equivalents. A contract issued by a UK company entitling you to future equity is a contract with a non-US issuer, whatever the term sheet calls it.
Shares held through a UK nominee. A nominee arrangement is not an account at a financial institution, so it does not turn your holding into a reportable account. The beneficial interest remains yours and the analysis follows it, not the name on the register.
Shares in a dormant or previous UK company. Serial founders report the current venture and forget the earlier one, but dormant does not mean valueless, and a company still holding cash or intellectual property is still an interest in a foreign entity.

A worked example: a US founder in London

Consider a US citizen who moved to London several years ago, has been a bona fide UK resident throughout the tax year, and files as a single person. She incorporated a UK limited company and subscribed for 800,000 ordinary shares at one penny each, a total of 8,000 pounds. During the year the company closed a priced seed round at 1.20 pounds per share. She also holds a convertible loan note of 40,000 pounds issued by the company, a director's loan account credit balance of 25,000 pounds, and a personal UK current account that peaked at 30,000 pounds. The company's own business account peaked at 600,000 pounds, and she owns 62 percent of the company.

Her Form 8938 position runs as follows. The shareholding valued on the round price is 960,000 pounds, which alone puts her well above the 200,000 US dollar year-end threshold for a single filer meeting the presence abroad test. She files Form 5471 for the company, so she does not list the shares again in the detailed asset parts; she enters the number of Forms 5471 filed in Part IV. The loan note, the loan account credit balance and her personal current account are not on the Form 5471, so all three are listed in the detailed parts and converted at the Treasury Bureau of the Fiscal Service rate on the last day of the tax year. The company's business account is an indirect interest held through an entity and is not a Form 8938 item at all.

Her FBAR position is almost the mirror image. Her personal current account is reported. The company's business account is reported too, because her interest exceeds 50 percent. Her shares, her loan note and her loan account balance are not FBAR items. Had she prepared the FBAR first and treated it as the master list, she would have omitted three assets from Form 8938 and understated her disclosed foreign asset position by around a million pounds, in a year she received no cash and owed no additional US tax.

What happens if Form 8938 was missed in prior years?

The penalty structure is severe and does not depend on any tax being due. Failure to file a complete and correct Form 8938 by the due date, including extensions, carries a penalty of 10,000 US dollars. If the form is still not filed within 90 days after the IRS mails a notice of the failure, a further 10,000 US dollars applies for each 30-day period or part period, capped at 50,000 US dollars in continuing penalties. Where an underpayment arises from a transaction involving an undisclosed specified foreign financial asset, the accuracy-related penalty is 40 percent of that underpayment. On a joint return the instructions treat spouses as a single person for the failure-to-file penalty, with joint and several liability. The instructions also record a presumption that bites hard on private assets: if the IRS asks for information about an asset's value and it is not supplied, you are presumed to hold specified foreign financial assets worth more than the reporting threshold.

The quieter consequence reaches further. Filing Form 8938 late, or never, keeps the assessment period open. The instructions state that the period of limitations remains open until three years after the date on which you file Form 8938, and that where you omit from gross income more than 5,000 US dollars attributable to a specified foreign financial asset the IRS may assess tax within six years after the return was filed. A missing form on an old return does not quietly age out; it holds that entire year open, including every unrelated item on it.

There is statutory relief: no penalty is imposed where the failure is due to reasonable cause and not to willful neglect, judged on the facts and circumstances. Founders who correct proactively, before any IRS contact, are in a materially different position from those who wait for a notice. Where the omission spans several years and the failure was non-willful, the Streamlined Filing Compliance Procedures are the route most commonly used to bring US returns and international information returns up to date, and Form 8938 is one of the forms filed within that submission. Form 8938, Form 5471 and the FBAR should be corrected together, because a submission that fixes one and leaves the others inconsistent invites exactly the review it was meant to avoid.

Getting Form 8938 reporting for US founders right, year after year

The fix is procedural rather than technical. Once the shares in your own UK limited company are treated as what the Code says they are, the rest of the form follows. A workable annual routine looks like this.

Start from the cap table and the statutory accounts, not from bank statements. Bank data will never surface the largest asset on the form.
List every instrument the company has issued to you, not only shares: loan notes, options, advance subscription agreements and loan account balances.
Fix the valuation basis before the year end and record in writing why it was chosen and what supported it.
Reconcile Form 8938, Form 5471 and the FBAR as a deliberate three-way check, and expect the three lists to differ. If they match exactly, at least one is wrong.
Complete Part IV whenever the Form 5471 exception is relied on, and confirm the Form 5471 itself was filed on time.
Re-test the presence abroad position in any year you moved, because the threshold can change even though nothing about the company changed.

Form 8938 reporting for US founders fails for one reason above all: the asset at the centre of it does not look like a financial asset to the person who owns it. Our US tax return preparation and compliance work for founders, investors and shareholders with UK companies starts from the share register rather than the bank statements, and where prior years need correcting we deal with the Form 8938, Form 5471 and FBAR positions as a single exercise rather than one form at a time.