Background
When a UK company has a branch overseas the results of that branch are incorporated into the company’s own results for corporation tax purposes and taxed as part of the company’s taxable profits with credit being given for any tax paid in the relevant overseas jurisdiction.
This means amongst other things that the company gets immediate tax relief in respect of any losses incurred in a branch which is particularly relevant whilst the branch is in a ‘start-up’ stage.
Once the branch starts generating taxable profits the UK company can normally arrange to transfer the activities of the branch into a new overseas subsidiary and since the introduction of the so-called dividend exemption any dividends received from that subsidiary will generally not be subject to UK tax.
In short the UK company gets...
