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ARTICLE · 21 MAY 2026

Exemption For Foreign Permanent Establishments Be Made Mandatory

Travers Smith LLP
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The UK government plans to make the foreign permanent establishment exemption mandatory from January 2027, fundamentally changing how UK companies are taxed on overseas operations. This policy shift, accelerated for oil and gas companies to September 2026, will prevent businesses from using foreign branch losses to offset UK profits while exempting future foreign profits from UK tax. What implications will this have for international business structures, loss relief strategies, and the broader competitivene

United KingdomTax
Hannah Manning
Hannah Manning
Madeline Gowlett
Madeline Gowlett
Joseph Sheldrick
Joseph Sheldrick
Claudia French
Claudia French
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The UK government has announced it intends to make profits and losses attributable to a foreign permanent establishment (PE) of a UK resident company mandatorily exempt from UK tax.

Key Insights

  • From 1 January 2027, the exemption for foreign PEs will become mandatory for all UK companies. For oil and gas companies, the change will take place four months earlier, on 1 September 2026.
  • Pre-exemption PE losses will likely be 'hard-stopped', and anti-forestalling rules will target abusive attempts to accelerate their use.
  • Justified as funding the 'Great British Summer Savings' package of measures to support families with the cost of living, the proposal is aimed at 'super' profits generated by oil and gas companies amid geopolitical tension in the Middle East.

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