Speed Read: The tax treatment of foreign branches is to be reviewed with any new legislation enacted in 2011. The key question of such a review is whether foreign branch profits should be exempt and there has been a strong push for this from the financial services sector to reduce compliance costs and maintain the UK's competitiveness. However, if the exemption is coupled with a loss disallowance this could create significant costs for other sectors. But to avoid this, the UK could borrow from European countries allowing branch exemption with loss offset, subject to recapture when the branch becomes profitable.
