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The short answer
A UK-resident company pays Corporation Tax on all its profits, from the UK and abroad, so profits made in Nigeria are in the UK charge unless an exemption applies. Nigerian tax paid on those profits can usually be credited against the UK tax under the UK–Nigeria tax treaty, but the credit is capped; alternatively a company can elect to exempt all its foreign branch profits, and PwC reports that the government announced in May 2026 that this exemption becomes mandatory for accounting periods beginning on or after 1 January 2027.
Many UK companies run by Nigerians earn some of their profit in Nigeria: a Lagos office that serves local clients, a project team on site, or a subsidiary that trades there. The UK question is simple to state and easy to get wrong: does the UK tax that profit, and if Nigeria has already taxed it, what happens next?
The starting point: worldwide profits
GOV.UK says a UK-resident company pays Corporation Tax on all its profits from the UK and abroad. A non-UK company with a UK branch pays only on its UK activities, but that is the reverse case. The rates, per GOV.UK, are 19% for profits of £50,000 or less, 25% for profits over £250,000, and marginal relief in between, with the limits reduced for short accounting periods and shared between associated companies.
How the Nigerian profit reaches the UK computation depends on structure:
- Branch or permanent establishment. The Nigerian operation is part of the UK company. Its profits are in the UK company's accounts and, unless the company has elected for the branch exemption, in its taxable profits.
- Nigerian subsidiary. The subsidiary is a separate Nigerian company taxed in Nigeria. The UK parent is taxed only on what it receives, such as dividends, interest or fees. PwC says most foreign dividends received by UK companies are exempt if they meet one of several widely drawn criteria.
Credit for Nigerian tax
Without an election, PwC's UK summary says foreign branch profits are taxed in the normal way, with credit for local direct taxes under a treaty or the UK's unilateral relief rules. The UK–Nigeria Double Taxation Convention provides for credit on both sides. The UK credit is limited: section 42 of the Taxation (International and Other Provisions) Act 2010 sets a cap on the credit by reference to the Corporation Tax rate on the income, so Nigerian tax above the UK tax on the same profits is not refunded.
Worked example
Example only, simplified, ignoring marginal relief and timing. A UK company with group profits well above £250,000 has a Lagos branch whose profit is £100,000. Assume, for the example, that Nigeria taxes that branch profit at 30% (the Nigerian rate that applies to your company is covered in our article on Nigerian company income tax), so Nigerian tax is £30,000.
| Step | Amount (example) |
|---|---|
| Branch profit in UK computation | £100,000 |
| UK Corporation Tax at 25% | £25,000 |
| Nigerian tax paid | £30,000 |
| Credit allowed (capped at UK tax on that profit) | £25,000 |
| UK tax left to pay on branch profit | £0 |
| Nigerian tax not relieved | £5,000 |
Check: £25,000 − £25,000 = £0 UK tax; £30,000 − £25,000 = £5,000 unrelieved. When Nigerian tax is lower than UK tax, the UK collects the difference instead.
The branch exemption election
Section 18A of the Corporation Tax Act 2009 lets a company elect so that the profits and losses of its foreign permanent establishments are taken out of its UK taxable profits. Section 18F says the election applies to all accounting periods beginning on or after the "relevant day", which for a UK-resident company is the start of its next expected accounting period; it is irrevocable once that day arrives, though it can be revoked before then. PwC adds that the election covers all of a company's foreign branches, not one at a time, and that some investment profits are excluded.
- Upside
- No UK tax on Nigerian branch profits, so no capped credit and no unrelieved Nigerian tax.
- Downside
- Nigerian branch losses can no longer reduce UK profits.
- Scope
- All foreign branches together, not a single country.
The change PwC reports for 2027
PwC's UK summary, reviewed July 2026, says the government announced on 21 May 2026 that the branch exemption will become mandatory for foreign permanent establishments of UK companies, for most companies for accounting periods beginning on or after 1 January 2027 (from 1 September 2026 for oil and gas extraction). If your Nigerian branch makes losses that you currently set against UK profits, that matters for your planning now. Check the final legislation with your adviser before relying on the date.
What to check first
- Is the Nigerian activity a branch, a subsidiary or neither? Read when a UK company owes Nigerian company income tax.
- Has anyone made an s.18A election in the past? It may already apply.
- Do you have Nigerian tax receipts and assessments to support a credit claim?
- Is any of the Nigerian income subject to withholding tax instead? See double tax relief for Nigerian WHT.
- Where are the company's key decisions taken? If the board effectively runs the company from Lagos, get advice on Nigerian residence before anything else.
Where Pryme fits
Credit claims depend on evidence. A Pryme Business Account keeps naira and pound flows in one ledger with statements for each currency (business multicurrency), and you can generate verifiable statements and receipts with VerifyDoc.ai for your adviser (receipts). Naira deposits are held by a licensed Nigerian microfinance bank.
Questions people ask
Does a UK company pay tax on profits made in Nigeria?
Yes. GOV.UK says a UK-resident company pays Corporation Tax on all its profits from the UK and abroad, subject to credit relief or an exemption election.
Can I get credit for Nigerian tax against UK Corporation Tax?
Usually, under the UK–Nigeria treaty or unilateral relief, but the credit cannot exceed the UK tax on the same profits.
What is the foreign branch exemption?
An election under section 18A CTA 2009 that removes the profits and losses of all foreign permanent establishments from UK taxable profits. It is irrevocable once it takes effect.
Is the branch exemption becoming compulsory?
PwC reports the government announced on 21 May 2026 that it becomes mandatory for most companies for accounting periods starting on or after 1 January 2027. Check the final law.
Sources
- GOV.UK: Corporation Tax (updated 23 Oct 2026) · accessed Oct 2026
- GOV.UK: Corporation Tax rates (updated 23 Oct 2026) · accessed Oct 2026
- legislation.gov.uk: Corporation Tax Act 2009, section 18A (up to date to 11 Oct 2026) · accessed Oct 2026
- legislation.gov.uk: Corporation Tax Act 2009, section 18F · accessed Oct 2026
- PwC Worldwide Tax Summaries: United Kingdom, corporate income determination (reviewed 23 Jul 2026) · accessed Oct 2026
- legislation.gov.uk: Taxation (International and Other Provisions) Act 2010, section 42 (amount of limit) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.