- The government has announced that UK-resident companies will be required to exclude profits and losses attributable to foreign permanent establishments (together with credits for associated overseas tax suffered) from their corporation tax computation, effectively making the existing elective foreign branch exemption mandatory.
- Existing transitional rules will be amended in relation to relieving current-regime tax losses and other attributes against UK profits that arise after the effective date.
- Draft legislation is expected to be published over the summer.
- Timing: in most cases, the changes will have effect for corporation tax accounting periods beginning on or after 1 January 2027. An earlier start date will apply to UK-resident companies with foreign permanent establishments that carry on activities in connection with the exploration or exploitation of oil and gas, with the new rules applying with specific effect from 1 September 2026.
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