UK taxation of foreign profits in a UK resident company
Produced in partnership with Jeremy Cape and Robert O'Hare of Squire Patton Boggs (UK) LLP
UK taxation of foreign profits in a UK resident company

The following Tax guidance note Produced in partnership with Jeremy Cape and Robert O'Hare of Squire Patton Boggs (UK) LLP provides comprehensive and up to date legal information covering:

  • UK taxation of foreign profits in a UK resident company
  • The scope of UK corporation tax
  • Relief for foreign tax paid
  • Double tax treaties
  • Unilateral relief for foreign tax paid
  • Effect and limits of credit relief
  • Foreign tax unrelieved by credit
  • Foreign tax relief by way of deduction
  • Losses arising from foreign trading activities

Many UK companies operate entirely within the boundaries of the UK, with all of their customers and suppliers being based in the UK, such that all of the company's profits and gains are generated by activity in the UK. However, not all UK resident companies do so and for quite a large population of UK companies their profits include non-UK profits. These companies therefore have to consider the interaction of:

  1. the UK principle of taxing worldwide profits, for which see more below, and

  2. the tax systems of other territories

This population of UK resident companies with non-UK profits is not limited to large multinational groups but includes any company that suffers foreign tax, whether by way of:

  1. withholding tax on payments received, and/or

  2. tax due by direct assessment in a foreign territory that imposes tax on the activity of the UK resident company, whether or not the non-UK activities constitute a permanent establishment (PE)

This note sets out a brief summary of the key issues a UK resident company with foreign profits would have to consider with regard to the scope of UK corporation tax and the foreign tax relief available to it, assuming that it has not made an election to exempt its foreign branch profits, which is explained further in Practice Note: Structure of the foreign branch exemption.

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