How do I transfer inventory from my US company to my UK company with proper intercompany invoices?

This is a stock move between two books, not a customer order. Transfer order, in-transit, receipt, transfer-price invoice, elimination. If you skip a step, one company is missing inventory and the other is missing a bill.

Transfer versus dropship versus domestic move

A transfer is not the same as a dropship. In a dropship the US storefront sells to the customer and the UK warehouse ships; you still need an intercompany invoice, but the trigger is the customer shipment. Here there is no customer. US Co is selling stock to UK Co so UK Co can own and later sell it. It is also not a domestic warehouse move. Same US entity, two buildings, is transfer order, in-transit, receipt, and no invoice. Cost stays on the same layer. Cross a company line and you raise a bill. Do not run this as a month-end spreadsheet of "units that left the US." Shipments you miss become someone else's shrink.

How the transfer posts on both books

Raise a transfer order on US Co for the SKUs and qty. Pick and ship it from the US warehouse (or US 3PL) against that order, not against a dummy sales order. The units leave US on-hand and sit in-transit: still valued, in neither building, not available-to-sell. When the UK 3PL or warehouse receipts the transfer, UK on-hand goes up and in-transit goes to zero. Same day, US Co invoices UK Co at the transfer price. US records intercompany revenue (or a transfer-price sale) and relieves the in-transit value as intercompany COGS. UK records intercompany AP and puts the units on the UK books at that transfer price, plus any freight and duty that landed with the receipt. At consolidation, eliminate the internal sale and the internal markup still sitting in UK inventory. That markup is unrealized until UK sells to a customer.

Transfer price, FX, and returns

Pick a transfer-price policy and use it every time: landed US WAC, or WAC plus a fixed markup. Below WAC is a gift you will explain twice. Do not invent a markup because a blog used one. Set the UK entity's base currency to GBP before the first receipt. Rate updates do not revalue stock already received. Returns of transferred goods go back on a return transfer with a reversing invoice, not a Slack adjustment. Lock both entities on the same night. Open in-transit at month end is the usual close stall: US already shipped, UK has not received, and someone wants to expense the difference. This is accounting mechanics, not tax advice. Transfer-pricing documentation and VAT on the movement are a tax conversation on top. The invoice is still required.