The UK government has proposed reforms to make the foreign branch exemption mandatory, meaning overseas branch profits and losses will automatically be excluded from UK corporation tax calculations. As a result, companies will no longer be able to use overseas branch losses to offset UK taxable profits. The changes are expected to take effect from 1 September 2026 for oil and gas activities and from accounting periods beginning on or after 1 January 2027 for most other UK companies. While many businesses are unlikely to be significantly affected, multinational groups and capital-intensive sectors may face higher tax costs. With draft legislation still pending, businesses should review their overseas permanent establishment structures, assess the potential tax impact, and consider the implications for their wider tax planning.
Originally Published by Crowe UK on 2 July 2026
