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The short answer
A branch is not a separate company, so a Nigerian branch's income, costs, assets and liabilities belong in the UK company's own statutory accounts, translated into pounds under FRS 102. GOV.UK says a UK-resident company pays Corporation Tax on all its profits from the UK and abroad; Nigeria may also tax profits attributable to a permanent establishment there, with treaty relief or an optional branch exemption election in the UK. Nigerian company law generally expects a foreign company to incorporate locally before carrying on business.
Many UK owners talk about their "Nigerian branch" when they mean a few staff and a rented office in Lagos operating under the UK company's name. In accounting and tax, a branch has a precise meaning: an extension of the same legal person, not a separate one. Getting that right decides how the year-end accounts are built, what goes on the Corporation Tax return and what Nigeria may expect.
First, check it can lawfully be a branch
Gresyndale Legal's summary of section 78 of CAMA 2020 says a foreign company must incorporate a separate Nigerian entity before carrying on business in Nigeria, and that without one it cannot have a place of business or an address for service there, other than for steps preparatory to incorporation. Limited exemptions exist through the Minister, for example for some government-invited or donor-funded projects. So a UK company running an ongoing operation in Lagos through an unincorporated branch is exposed under Nigerian company law, whatever the accounts say. Most UK owners in this position move the operation into a subsidiary; see setting up a Nigerian subsidiary. Until then, the rest of this article applies.
How the branch goes into the UK accounts
Because the branch is the same company, there is no consolidation. Its transactions are recorded in the company's own books and appear in its individual statutory accounts filed at Companies House. In practice:
- Keep a separate set of branch ledgers in naira, with a branch code so its results can be seen separately.
- Record each naira transaction in pounds at the spot rate on the transaction date, or an average rate if rates do not fluctuate significantly, as HMRC's BIM39510 summarises FRS 102 section 30.
- Retranslate naira cash, receivables and payables at the closing rate at the year end; differences generally go to profit or loss.
- Remove balances between head office and the branch, because a company cannot owe itself money.
- If the company is audited, the branch is within the same audit; the auditor will want access to branch records.
Where a branch operates with significant independence in naira, the functional-currency rules in FRS 102 section 30 may treat it as a foreign operation, which changes how translation differences are presented. Agree the classification with your accountant. More on exchange differences: FX gains and losses for a UK company holding naira.
UK Corporation Tax on branch profits
GOV.UK states that a UK-resident company pays Corporation Tax on all its profits from the UK and abroad. By default, then, the branch's profit or loss is part of the company's taxable profit. Two mechanisms stop the same profit being fully taxed twice.
Credit for Nigerian tax
Under Article 7 of the 1987 UK-Nigeria double taxation agreement, Nigeria may tax business profits of a UK enterprise only if it has a permanent establishment in Nigeria, and only the profits attributable to it. Article 5 defines a permanent establishment to include a branch, an office and a place of management. Nigerian tax paid on those profits can generally be credited against UK tax on the same profits.
The branch exemption election
Alternatively, a company can elect under section 18A of the Corporation Tax Act 2009 to exempt the profits of its foreign permanent establishments. HMRC's International Manual (INTM281020, updated 15 October 2026) says the election must specify the accounting periods it covers, has no effect until the company holds a foreign permanent establishment, and can be withdrawn only until the start of the first accounting period it relates to, after which it becomes irrevocable. An exemption also means branch losses no longer reduce UK profits, so it is usually considered once a branch is reliably profitable.
Worked example (illustrative)
Example: in the year, the Lagos branch earns ₦60,000,000 of revenue and spends ₦48,000,000, a profit of ₦12,000,000. At an assumed average rate of ₦2,000 to £1, the branch adds £6,000 to the UK company's profit (12,000,000 ÷ 2,000). Without an election, that £6,000 is in the UK Corporation Tax computation, with credit for any Nigerian tax on the same profit. With an election in force for that period, the branch's attributable profit is left out. The rate is invented for the arithmetic.
The Nigerian side
If Nigeria treats the branch as a permanent establishment, it will expect the UK company to account for Nigerian tax on the attributable profits; see Nigerian company income tax and a UK company's permanent establishment. EY reports that from 1 January 2026 the Nigeria Tax Administration Act 2025 requires non-resident companies to register for a Tax ID, in some cases even without a permanent establishment, and that a Nigerian company awarding a contract to an unregistered person can face a ₦5 million penalty, which is why Nigerian clients may ask for your Tax ID.
Year-end checklist
- Confirm with a Nigerian lawyer whether the operation needs to be incorporated under CAMA 2020.
- Close the branch ledgers and reconcile naira bank accounts to statements.
- Translate using an agreed rate policy and retranslate monetary items at the closing rate.
- Eliminate head office and branch balances.
- Work out profits attributable to the branch for Nigerian and UK purposes.
- Decide, with advice, whether a section 18A election suits future periods, before the first period it would cover starts.
- Keep records for both tax authorities; see HMRC record keeping for foreign transactions.
Where Pryme fits
A Pryme Business Account keeps naira and pounds side by side with a full transaction history, which makes branch bank reconciliations quicker, and the Finance agent can prepare them for a person to approve. See the Finance agent.
Questions people ask
Do I include a Nigerian branch in my UK company accounts?
Yes. A branch is part of the same company, so its income, costs, assets and liabilities are in the UK company's own statutory accounts, translated into pounds.
Is a Nigerian branch taxed in the UK?
By default yes: GOV.UK says UK-resident companies pay Corporation Tax on profits from the UK and abroad. Treaty credit for Nigerian tax, or a section 18A branch exemption election, can prevent double taxation.
Can a UK company operate a branch in Nigeria without registering a Nigerian company?
Section 78 of CAMA 2020, as summarised by Gresyndale Legal, says a foreign company must incorporate locally before carrying on business, subject to narrow exemptions. Take Nigerian legal advice.
Can I revoke the branch exemption election?
HMRC's INTM281020 says it can be withdrawn only until the start of the first accounting period it covers; after that it becomes irrevocable.
Sources
- Mondaq (Gresyndale Legal): Can a foreign company do business in Nigeria without incorporation? (8 Apr 2024) · accessed Oct 2026
- HMRC Business Income Manual BIM39510: foreign exchange, FRS 102 (updated 4 Aug 2026) · accessed Oct 2026
- GOV.UK: Corporation Tax · accessed Oct 2026
- GOV.UK: 1987 UK-Nigeria double taxation agreement (in force) · accessed Oct 2026
- HMRC International Manual INTM281020: election for S18A to take effect (updated 15 Oct 2026) · accessed Oct 2026
- EY Global Tax News: Nigeria tax registration for non-resident companies (17 Feb 2026) · 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.