LAM12030 | International and cross border: Branch exemption CTA09/S18Q

UK companies trading outside the UK through a permanent establishment can elect for exemption from tax on branch profits under the provisions in CTA09/PART2/CH3A.

These provisions apply equally to life companies subject to the modification in CTA09/S18Q. This provision effectively excludes any BLAGAB profits or losses from the profit/loss attributed to the branch for the purposes of the exemption. Profits arising from BLAGAB are not to be regarded as forming part of a ‘relevant profits amount’ or ‘relevant losses amount’ as defined in CTA09/S18A(6).

The exemption is intended to apply to trade profits of branches whereas the BLAGAB I-E aims to tax policyholder return. It is unlikely that any BLAGAB business would be written in an overseas branch. Overseas branch business is normally written with local non-UK policyholders and will qualify as overseas life assurance business (OLAB) and non-BLAGAB LAM12040. However, it is possible for such business to be written. The exclusion from the exemption ensures that where policies do not qualify for OLAB/non-BLAGAB treatment, the policyholder return is fully taxed in the company together with any shareholder profits in respect of BLAGAB.