Corporation Tax Act 2009 section 18A

Exemption for profits or losses of foreign permanent establishments

Section 18A allows a UK resident company to elect to exclude from its UK corporation tax calculation any profits or losses attributable to its foreign permanent establishments, subject to certain exceptions relating to UK land and property.

• A company can elect to exempt from UK tax the profits and losses of its overseas permanent establishments, with adjustments made at the appropriate stages in calculating taxable total profits
• Certain UK-connected items cannot be exempted, including profits or losses from dealing in or developing UK land, UK property business, other UK property income, related loan relationships and derivative contracts, and gains or losses on disposals of interests in UK land or assets deriving at least 75% of their value from UK land
• The exempt amount is calculated by aggregating the profits and losses attributable to each foreign territory where the company operates through a permanent establishment, using the relevant double taxation treaty or, where no full treaty exists, the OECD Model Convention
• The election applies to accounting periods following the one in which it is made, and the attribution of profits and losses to a permanent establishment follows the same principles used for determining foreign tax credit relief under TIOPA 2010