Branch incorporation and tax

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Branch incorporation and tax
  • Relief on incorporation of overseas branch
  • Relief from corporation tax on chargeable gains
  • Relief under the intangible fixed assets regime
  • Comparison of branch incorporation relief under chargeable gains and intangible fixed assets rules
  • Relief on incorporation of EU branch—EU Mergers Directive
  • Example of incorporation of an overseas branch under the Mergers Directive
  • Practical and further tax issues arising on branch incorporation
  • Trading losses and unrelieved foreign tax
  • Corporate migration or branch incorporation

Branch incorporation and tax

IP COMPLETION DAY: The Brexit transition period ended at 11pm on 31 December 2020. At this time (referred to in UK law as ‘IP completion day’), transitional arrangements ended and significant changes began to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

This Practice Note explains the concept of branch incorporation relief, which is available under UK domestic law in respect of:

  1. corporation tax on chargeable gains, and

  2. corporation tax arising under the intangible fixed assets regime

The note then explains the broader corporation tax relief available in the UK upon incorporation of an EU branch as a result of the implementation of the EU Mergers Directive.

Finally, the note sets out some of the practical tax and commercial considerations that arise when incorporating a branch.

Relief on incorporation of overseas branch

This section of the Practice Note focuses on the incorporation of an overseas, rather than a UK, branch or permanent establishment (other tax reliefs are available when incorporating a UK branch or permanent establishment).

For full details of the meaning of permanent establishment for UK tax purposes, see Practice Note: What is a UK permanent establishment?

Branch incorporation relief has historically been used by businesses transferring intellectual property (IP) and goodwill used

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