beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

International Manual

UK residents with foreign income or gains: corporation tax: Foreign branch

The profits of a UK resident company carrying on a trade both in the UK and abroad or abroad only through branches in different countries will normally be charged to UK tax as trade income. The profits and losses of each source will be aggregated to form a single income component of the Corporation Tax computation. The results of one foreign branch may be a profit on which foreign tax is payable, but the results of another foreign branch or in the UK may be a loss which, when aggregated with other profits, produces no trade income liability. If the company has income from other sources, for example property income, then, although there is Corporation Tax liability on the company’s profits as a whole, no tax credit relief is due for the foreign tax paid on the profit making foreign branch profits. The reason for this is that no UK tax has been borne on the foreign branch profits since the aggregate trade income liability is nil. See INTM163040.


A UK company has foreign branch profits in Country A of £1,000 on which Country A’s tax of £400 has been paid. It has a foreign branch loss in Country B of £1,000. It has Loan Relationship income of £800. No credit is due for Country A’s tax of £400 since its Corporation Tax computation is:

  Trade Loan Relationship Total
  £ £ £
Profit Foreign branch A 1,000 800 1,800
Less loss Foreign branch B 1,000   1,000
  NIL 800 800

Tax on £800 at 30% = £240, none of which is chargeable as trade income.

In these circumstances tax credit relief may not be claimed and the foreign tax should be deducted under TIOPA10/S112 (INTM161050). In this way a loss of £400 results, which can be set against the Loan Relationship income under CTA10/S37.

Additionally, it should be noted that for accounting periods beginning on or after 21 March 2000 excess foreign tax may be carried forward or back - see INTM163040.