Foreign branch exemption—impact on other tax rules
Produced in partnership with Robert O’Hare of Squire Patton Boggs
Foreign branch exemption—impact on other tax rules

The following Tax practice note produced in partnership with Robert O’Hare of Squire Patton Boggs provides comprehensive and up to date legal information covering:

  • Foreign branch exemption—impact on other tax rules
  • Capital gains—no gain no loss
  • Intangible fixed assets
  • Capital allowances
  • Leasing
  • Disposal event
  • Other tax provisions amended

Foreign branch exemption—impact on other tax rules

As explained in Practice Note: Foreign branch exemption—foreign permanent establishments amount there are a number of rules that must be followed in calculating the foreign permanent establishments amount (FPEA) in order to establish how much of a company's profits should be exempt from UK tax under the foreign branch exemption.

However, the ability of a UK company to elect to exempt the profits attributable to its overseas permanent establishments (PE) from UK tax could both:

  1. impact the other taxes paid by the UK company, and

  2. be undone by the existing rules for other taxes

This Practice Note explains some of the special rules that have been introduced to ensure the tax system continues to operate as it should as a whole, in the following broad areas:

  1. capital gains

  2. intangible fixed assets

  3. capital allowances, and

  4. other provisions

Capital gains—no gain no loss

There are a number of provisions in the Taxation of Chargeable Gains Act 1992 (TCGA 1992) that operate the ‘no gain no loss’ principle (a full list of which is found in TCGA 1992, s 288(3A)). In essence, where such provisions apply, capital assets can be transferred from one person to another without triggering a chargeable gain (or allowable loss). Very broadly, the parties are treated as if the asset acquired (by the transferee) was acquired for a consideration equal to

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