Mandatory Foreign Branch Exemption: Impact on UK Companies
UK companies operating overseas through branches have enjoyed flexibility in how those activities were taxed in the UK. However, significant changes are now expected following a recent announcement by HMRC. The government is moving towards a more standardised and restrictive regime, removing taxpayer discretion and reshaping the interaction between foreign branch profits, losses, and UK corporation tax.
What is Changing in the Foreign Branch Election Exemption? HMRC announced on 21 May 2026 that the foreign branch exemption election will become mandatory for most UK resident companies. The changes are intended to protect the UK tax base from sheltering early-phase overseas losses where later profits are usually not fully subject to UK corporation tax. Additional burden of ensuring appropriate characterisation of overseas activities that could impact both available brought forward losses as well as the go-forward position.
We use cookies on our website. Some of them are essential for the operation of the site, while others help us to improve this site and the user experience (tracking cookies). You can decide for yourself whether you want to allow cookies or not. Please note that if you reject them, you may not be able to use all the functionalities of the site.
