Page 66 - F1 Integrated Workbook STUDENT 2018

Chapter 3

Types of overseas operations

An overseas operation can be run as a branch or a subsidiary.

3.1 Subsidiary (refer to consolidation chapter for more detail)
The features of operating as a subsidiary are:

 The overseas subsidiary is a separate entity for tax purposes. The holding
company will only pay tax on any dividends received from the subsidiary.

 Loss relief is not available for the group because the overseas subsidiary will be
paying tax under a different tax regime.
 The overseas subsidiary cannot claim the same tax depreciation as the parent
on any assets, although may receive an alternative type of tax depreciation or
the equivalent in the overseas country. Assets transferred from the parent may
also result in capital gains tax.

3.2 Branch

The features of operating as a branch are:

 The branch is treated as an extension of the UK activity and all profits from it
will be subject to UK taxation.

 Loss relief is available for the group.
 Assets can be transferred between the branch and holding company at no
gain/no loss.
 The branch can claim tax depreciation on all assets.

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