International issues

By Tolley in association with Robert Langston of Saffery Champness
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The following Corporation Tax guidance note by Tolley in association with Robert Langston of Saffery Champness provides comprehensive and up to date tax information covering:

  • International issues
  • Cross-border claims and elections
  • Branch exemption
  • Corporate interest restriction ― periods after 1 April 2017
  • Worldwide debt cap
  • Late payment of interest
  • Withholding taxes
  • Overseas tax issues
  • Controlled foreign companies
  • Transfer pricing
  • Profit fragmentation
  • Country by country reporting

This guidance note outlines the international tax issues a company should consider in advance of its year end.

Cross-border claims and elections

Certain UK tax reliefs are restricted to transactions between UK group companies; this is arguably contrary to EU law. A group should consider if any (protective) claims or elections should be made in respect of transactions with non-UK group companies.

These may include:

  • claims for group relief for losses of overseas group companies
  • no gain / no loss treatment for transfers of assets between group companies
  • deferral of any exit charge which arises when a company ceases to be resident in the UK ― see the Outbound migration guidance note for further details on exit charges
Branch exemption

A company can elect for its foreign branches to be exempt from corporation tax. In addition, the losses of exempt branches are not available to set against other profits.

This election is irrevocable and applies to all the foreign branches of a company.

The election must be made before the start of the first accounting period to which it will apply. See INTM281020 for details on the required form and information for the election.

The benefit of an election will depend on:

  • whether losses may arise in the future in the company’s foreign branches
  • the rate of overseas tax which is paid on the profits of the foreign branches

If significant losses are anticipated, then a branch exemption election may not be beneficial as these losses would not be available to set against UK profits of the company.

If the overseas

More on Year end tax planning: