UK taxation of foreign permanent establishments

FORTHCOMING CHANGE: On 21 May 2026, the government announced that it will make the foreign branch exemption mandatory for UK-resident companies that conduct part of their business through foreign PEs. That is, the profits and losses attributable to such PEs will be exempt from UK tax. Draft legislation enacting this measure is expected to be published during summer 2026. The change is intended to take effect for accounting periods beginning on or after 1 January 2027. However, for UK-resident companies that conduct foreign PE activities in relation to oil and gas extraction and exploration, the change is intended to take effect from 1 September 2026. The accounting periods of such companies will be deemed to end on 31 August 2026, with the new regime applying from the following day. Losses arising in years before the change takes effect will not be available for set off against the company’s (or wider group’s) UK profits arising after the effective date. For more information, see HMRC’s policy paper.

The basic rule of the scope of UK corporation tax is that a UK resident company is chargeable