Introduction: What the Close Company Director Boxes Mean for American Owners
If you are a close company director, your 2025/26 UK tax return now asks four questions that it never asked before. HMRC wants the name and registration number of each close company you direct, the dividends you took from it, and the highest percentage of its share capital you held during the year. For most British owner-managers, this is an administrative nuisance. For an American who owns a UK limited company, however, it is something far more significant. It is a written record, filed with a government, of exactly the ownership that triggers Form 5471, controlled foreign corporation reporting and FBAR obligations in the United States.
Why Every Close Company Director Now Faces Four New Boxes
The change comes from the Income Tax (Additional Information to be included in Returns) Regulations 2025, numbered SI 2025/84. They were made on 27 January 2025 and apply to returns for tax years after 2024/25. Consequently, the first return affected is the 2025/26 return, which is due online by 31 January 2027, or by 31 October 2026 on paper. Previously, the director and close company questions on the employment pages were optional. Now they are compulsory, and each close company director must complete a separate employment page for every close company directorship held during the year.
At TaxYork, we prepare US and UK returns side by side for company owners, and we have already seen this change surface problems that had been dormant for years. Specifically, a British return that now states "60% shareholding" sits uneasily beside a US return that never mentioned a foreign company at all. This guide explains what the new boxes require, how the close company test really works for Americans, and how to make your UK and US filings tell the same story.
Who This Guide Is For
This article is written for American citizens and green card holders who live in Britain and own or direct UK companies. It also covers dual nationals, accidental Americans who only recently discovered their US status, and investment bankers or founders who sit on the boards of family or start-up companies. In particular, it addresses the close company director who has filed UK returns faithfully but has missed US tax returns, missed FBARs or missed the company-level reporting that the IRS expects.
What HMRC Now Requires on the SA102 Employment Pages
HMRC collects the close company director information on the SA102 employment pages rather than on the main SA100 return. Therefore, even a close company director who drew no salary at all must now complete an employment page for each close company. The requirement is mechanical, but the details matter, because a blank box counts as a failure.
The Legal Basis for the New Disclosure
Parliament gave HMRC the power in Finance Act 2024, which inserted new subsections into section 8 of the Taxes Management Act 1970. Subsection (1I) lets HMRC require any information specified in regulations, "whether or not the information is relevant" to the income being returned. Subsection (1K) then imposes a fixed penalty of £60 on anyone who fails to comply. The 2025 Regulations use that power in two ways. Regulation 4 asks whether you were a director of a company and, if so, whether it was a close company. Regulation 5 then asks for the close company details. In addition, a separate regulation requires the self-employed to state the date a business started or ceased.
Boxes 6 and 7: Director and Close Company Status
Box 6 asks whether you were a company director at any point in the year, and HMRC's notes confirm this includes a dormant company. Box 6.1 records the date you ceased to be a director, if you resigned before 6 April 2026. Box 7 then asks whether the company was close. According to HMRC's 2026 SA102 notes, a company is close if it is UK resident and controlled by its directors or by five or fewer participators. That short phrase "UK resident" carries enormous weight for Americans, as we explain below.
Boxes 7.1 to 7.4: The Close Company Details
Box 7.1 asks for the company's full name, and box 7.2 for its Companies House registration number. Box 7.3 asks for the dividends you received from that close company, and HMRC's notes tell you to enter zero rather than leaving it blank. Box 7.4 asks for your percentage shareholding, calculated by reference to the nominal value of the shares, and it must show the highest percentage you held at any point in the year. Moreover, the dividends in box 7.3 should be the same type of income you already report in the main dividends box on the SA100. In short, box 7.3 is a cross-check, not an extra charge.
The £60 Penalty and the Bigger Risk Behind It
The fixed penalty is £60, and professional bodies report that HMRC treats the director requirements as one composite obligation, so only one £60 penalty arises per return. However, for a close company director, the fixed penalty is the least of the worries. If the new boxes reveal dividends that were missing from the main return, HMRC can pursue inaccuracy penalties and interest on the tax itself. For a higher-rate taxpayer, that exposure dwarfs £60. Furthermore, HMRC has confirmed that unpaid directors must still complete the boxes, and in September 2026 it clarified only one narrow exception, for directors of registered charities and community interest companies who received no employment or dividend income.
Is Your Company Close? The Test American Owners Get Wrong
Most owner-managed UK companies are close companies, and almost every close company director assumes they know the answer. Nevertheless, Americans often hold structures that sit on the edge of the definition, and the edge cases decide whether the new boxes apply at all. The test turns on control and on residence.
The Control Test: Five Participators or Director Control
Under section 439 of the Corporation Tax Act 2010, a company is close if it is under the control of five or fewer participators, or of participators who are directors, however many there are. A participator is broadly anyone with a share or interest in the company's capital or income, including loan creditors in some cases. Importantly, when you test control, you attribute the rights of associates, which include your spouse, your relatives and certain business partners. As a result, a company where you own 30%, your spouse owns 30% and three friends own the rest is plainly close. HMRC's CTM60060 manual page sets out the broad definition, and the SA102 notes point directly to it.
Why a Delaware or US Company Is Never a Close Company
Section 442 of the Corporation Tax Act 2010 states that a company is not a close company if it is not resident in the UK. Consequently, if you are a director of your own Delaware corporation, a US LLC or any other non-UK resident company, you tick "Yes" at box 6 but "No" at box 7, and boxes 7.1 to 7.4 do not apply. This is the single most common error we see in drafts prepared for an American close company director. They list the US company as close simply because the client controls it. In fact, the statute excludes it entirely, and reporting it creates a mismatch HMRC may later query.
The UK Limited Company Run From America
The reverse situation is more dangerous. A company incorporated in England and Wales is UK resident by statute, even if you manage it from New York. The US-UK treaty does not automatically resolve a company's dual residence; instead, it leaves the question to the tax authorities to agree case by case. Therefore, a UK limited company you run from the United States normally remains UK resident and close, and if you still file UK returns, you remain a close company director who must complete the boxes. For a detailed look at the corporate side, read our guide to close investment holding companies for American owners.
Unpaid, Dormant and Nominee Directors
The requirement applies to every close company director who already files a Self Assessment return, whether paid or unpaid. It covers dormant companies, directors who resigned during the year, and de facto directors who act as directors without formal appointment. Notably, the regulations do not create a new duty to file a return. If you have no other reason to file, the boxes do not drag you into Self Assessment. However, most Americans in Britain with company income already file, and non-executive roles on family boards frequently fall within the net.
Measuring Shareholding and Dividends: Where UK and US Figures Diverge
The two numbers HMRC now collects from each close company director, dividends and shareholding percentage, are also two of the most important numbers on a US return. Unfortunately, the UK and the US measure both differently. Understanding the differences lets you file figures that reconcile rather than contradict each other.
Nominal Value in Box 7.4 Versus Vote and Value on Form 5471
HMRC asks each close company director for a shareholding by nominal value. If you own 600 of 1,000 shares of £1 each, you report 60%. In contrast, IRS Form 5471 tests ownership by vote and by value, and the controlled foreign corporation rules ask whether US shareholders hold more than 50% of either. Accordingly, a founder whose company issued non-voting growth shares or alphabet shares can show one percentage to HMRC and a very different one to the IRS. Neither figure is wrong. Nevertheless, you should document the reconciliation, because an examiner comparing the two will want to know why they differ.
The Highest Percentage During the Year
Box 7.4 asks a close company director for the highest percentage at any point in the tax year, not the year-end figure. For example, if you held 80% until a share issue in November diluted you to 55%, you report 80%. Form 5471, by contrast, largely looks at ownership at specific points, such as the end of the company's accounting period. Similarly, the UK tax year runs from 6 April to 5 April, while your US return follows the calendar year. As a result, a single dilution event can land in different reporting years in each country.
Dividend Timing and the Exchange Rate
UK tax treats a dividend as paid when the cash reaches you or, for a final dividend, when it becomes due and payable. The US generally taxes it when you receive it or it is credited to your account. For most close company directors, the dates coincide, but year-end dividends declared in late December and paid in January can fall into different years. Additionally, you must convert sterling to dollars for the IRS. The IRS yearly average exchange rates put 2025 at 0.759 pounds per dollar, so £100,000 of dividends becomes roughly $131,752. Box 7.3 stays in sterling, so the two returns never show the same number, and that is expected.
Dividend Tax Rates for 2025/26 and 2026/27
For the 2025/26 year covered by the new boxes, UK dividend tax is 8.75% in the basic band, 33.75% in the higher band and 39.35% in the additional band, after a £500 dividend allowance. From 6 April 2026, the dividend rates on gov.uk rose to 10.75% and 35.75% in the basic and higher bands, with the additional rate unchanged at 39.35%. Therefore, the dividend a close company director reports in box 7.3 next year will carry more UK tax, which in turn generates a larger foreign tax credit on the US return.
How the New Boxes Expose Missed US Filings
For an American, the real significance of the new boxes lies across the Atlantic. Each close company director who is also a US person now has a UK government record showing a foreign company, a shareholding and dividend flows. That is precisely the fact pattern behind several US information returns carrying $10,000 penalties.
Form 5471 and Controlled Foreign Corporation Reporting
An American close company director who owns 10% or more of a foreign company is a US shareholder, and if US shareholders together own more than 50% by vote or value, the company is a controlled foreign corporation. A US officer or director can also have a filing duty in the year a US person acquires a 10% stake. Under section 6038 of the Internal Revenue Code, each missing Form 5471 carries a $10,000 penalty per company per year, rising by up to $50,000 after IRS notice. Moreover, a missing form keeps the whole US return open to assessment. Our guide to section 6038 penalties for late UK company filings explains the full mechanics.
NCTI, the High-Tax Exclusion and Why Many Owners Owe Nothing
From 2026, the former GILTI regime is called net CFC tested income, or NCTI. It taxes US shareholders on a controlled foreign corporation's profits each year, whether or not those profits are paid out. However, a UK trading company paying corporation tax at 25% clears the high-tax threshold of 18.9% under section 954 of the Internal Revenue Code and its regulations, so a high-tax election normally removes the charge. A company on the 19% small profits rate clears it by only 0.1 of a point, so the calculation needs care. In our experience, the election saves most close company directors from any current US tax on retained profits, but only if the Form 5471 is filed in the first place.
FBAR and Financial Interest in Company Bank Accounts
The Bank Secrecy Act treats a US person who owns more than 50% of a company as having a financial interest in the company's foreign bank accounts. Consequently, a close company director who is also a majority owner must list the company's UK business accounts on the FBAR, as well as personal accounts. Directors with signature authority but no majority ownership may also need to report them. FinCEN's FBAR guidance sets the $10,000 aggregate threshold, and it is easily exceeded by a working company account. For this reason, a missed FBAR is one of the most common consequences we find when reviewing an American close company director's history. Our FBAR and FATCA reporting service handles both personal and company accounts.
Director's Loan Accounts and Section 956
Dividends are not the only way money leaves a close company. Many close company directors draw funds through a director's loan account, which triggers the section 455 charge in Britain at 35.75% for loans made from 6 April 2026, as HMRC's CTM61505 guidance confirms. For an American, however, a loan from a controlled foreign corporation can also produce a section 956 inclusion, taxed as if the company had paid a dividend. Read our detailed guide to the director's loan account for American owners before you draw on the company.
What HMRC Does With the Data and What Comes Next
HMRC has said openly that dividend payments are not routinely reported by third parties, so the new boxes fill a gap in its data. It can now compare each close company director's box 7.3 figure with the company's accounts, its corporation tax return and the shareholder lists at Companies House. In addition, HMRC consulted from 19 March to 10 June 2026 on reporting company payments to participators, which would make the company itself report loans, dividends and asset transfers to its owners. The US-UK treaty also allows the two tax authorities to exchange information on request. Therefore, the safest assumption is that your UK disclosures will eventually be visible to someone checking your US position.
Missed UK Returns, Missed US Returns and How to Correct Them
The new boxes make a clean, consistent filing history more valuable than ever. Fortunately, both countries offer routes to put things right, and the costs are lowest when you move before either authority contacts you.
Correcting Missed UK Returns and Undeclared Dividends
If you are a close company director who has missed UK tax returns or left dividends off earlier returns, the usual route is an unprompted disclosure to HMRC, either through an amended return within the normal window or through HMRC's digital disclosure facilities. Unprompted, careless errors can attract penalties as low as zero, while prompted or deliberate errors cost far more. HMRC's Self Assessment deadlines matter here, because an amendment to a 2024/25 return must generally be made by 31 January 2027. Additionally, remember that any extra UK dividend tax you pay may increase the foreign tax credit available on the corresponding US return.
Catching Up on Missed US Returns and Company Forms
On the US side, an American close company director resident in Britain who has missed US tax returns, FBARs and Forms 5471 through non-wilful conduct can often use the IRS Streamlined Filing Compliance Procedures. The foreign offshore route requires three years of returns and six years of FBARs, and it waives the information-return penalties. Where every return was filed and only the company forms are missing, the Delinquent International Information Return Submission Procedures may fit better, although penalties are not automatically waived. Our IRS Streamlined filing service assesses which route suits your facts.
Dual Nationals and Accidental Americans
Dual nationals and accidental Americans are especially exposed, because many have acted as a close company director for decades without knowing they had any US filing duty. The new boxes do not change their US obligations, but they do create a clear UK paper trail of ownership. Consequently, we recommend a full review before your 2025/26 UK return is filed, so that the UK figures and any US catch-up filings are prepared together. Our guide for US citizens who are UK company directors covers payroll and extraction planning in more depth.
Avoiding Double Taxation on Close Company Dividends
Dividends paid to a close company director are generally qualified dividends for US purposes, because the US-UK treaty makes a UK company a qualified foreign corporation, provided it is not a passive foreign investment company. The UK dividend tax you pay then supports a foreign tax credit on IRS Form 1116. However, the 3.8% net investment income tax is a separate charge, and recent litigation has confirmed that UK tax cannot offset it. For a strategy on the salary and dividend mix, our US-UK treaty and foreign tax credit service models both sides.
Case Study: A London Founder's First Close Company Director Disclosure
The following example is illustrative, but its figures reflect the situations we see each year. Daniel is a 44-year-old US citizen who has lived in London for eleven years. He owns 600 of the 1,000 ordinary £1 shares in a UK data consultancy he co-founded, and a British co-founder owns the other 400. The company made profits of £320,000 in its year to 31 March 2026 and paid corporation tax at 25%, or £80,000.
The UK Figures
As a close company director in 2025/26, Daniel took a salary of £12,570 and dividends of £180,000, paid as £90,000 in June 2025 and £90,000 in December 2025. In January 2026, the company issued 400 non-voting £1 shares to his wife, who is British, for family reasons unrelated to tax. His nominal holding therefore fell from 60% to 600 of 1,400 shares, or 42.9%. As a close company director, he enters the company name and number in boxes 7.1 and 7.2, £180,000 in box 7.3, and 60% in box 7.4, because that was his highest percentage during the year.
His income of £192,570 removes his personal allowance entirely. His salary uses £12,570 of the £37,700 basic rate band, leaving £25,130. The first £500 of dividends falls under the allowance, £24,630 is taxed at 8.75%, £87,440 at 33.75% and the remaining £67,430 at 39.35%. His UK dividend tax is therefore £58,200 to the nearest pound, and his total UK income tax is about £60,714.
The US Figures
At the IRS 2025 average rate of 0.759, Daniel's dividends equal about $237,154. Because the company is a controlled foreign corporation owned 60% by vote, Daniel needed a Form 5471 every year. He had never filed one, and he had never listed the company's two UK bank accounts on his FBAR, even though his majority ownership gave him a financial interest in them. His advisers had filed a basic Form 1040 with the dividends and a foreign tax credit, but nothing else.
The dividends qualify for the reduced US rate, and the UK dividend tax generates more credit than the US tax on them, so no regular federal tax remained. However, as a married person filing separately from a non-American spouse, his net investment income tax threshold is $125,000. The 3.8% charge on roughly $128,700 of excess income cost him about $4,900, which UK tax could not reduce. Meanwhile, the company's 25% corporation tax rate supported a high-tax election, so its retained profits created no NCTI charge.
The Outcome
The new close company director boxes forced the issue. Daniel's UK return would now show a 60% stake that his US returns had never disclosed. Before filing it, we prepared three years of amended US returns with Forms 5471 and six years of corrected FBARs under the Streamlined Foreign Offshore Procedures, supported by a non-wilful certification. As a result, a potential exposure of at least $30,000 in Form 5471 penalties alone, plus FBAR penalties, was resolved with no penalty at all. His 2025/26 UK return then went in with figures that reconcile cleanly to his US filings.
How TaxYork Can Help
TaxYork prepares US and UK tax returns together for close company directors, founders and investment professionals. For a close company director with American ties, that means completing the new SA102 boxes, preparing Forms 5471, 1116 and 8938, filing FBARs for personal and company accounts, and making sure the two countries see consistent figures. Furthermore, where past years are missing, we identify the right correction route in each country before either authority asks. We also advise on dividend timing, loan accounts and the salary mix through our cross-border planning service, so that each pound you extract is taxed only once.
Conclusion
The new close company director boxes look like a small administrative change. For most British directors, they are. For an American close company director, however, they create a formal, government-held record of the ownership and dividends that drive Form 5471, FBAR and controlled foreign corporation reporting. Consequently, the right moment to review your position is before you file your 2025/26 UK return, not after HMRC or the IRS writes to you. As a close company director, check whether your company is truly close, reconcile the nominal-value percentage with the vote-and-value test, and make sure every US form that the new figures imply is already on file.
Contact Us
If you are a close company director with US citizenship, a green card or dual nationality, our team can review both returns before your deadline. Book a consultation today, email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information about UK close company reporting and US-UK cross-border taxation. It does not constitute tax, legal or financial advice, and it does not create a professional relationship. The case study is illustrative, and its names, figures and outcomes are invented to demonstrate how the rules apply. Tax law changes frequently, and your position depends on your own facts. You should obtain professional advice before acting on any matter discussed here. Written by the TaxYork Expert Team — US-UK tax specialists.