Published 19 June 2026 · Updated 7 November 2026 · 2 min read
Since 2018 a US person who controls a UK company has been taxed in the US on most of the company's profit each year, distributed or not, under the global intangible low-taxed income rules in section 951A. The name is misleading: it catches ordinary UK consultancies, agencies and professional practices with few tangible assets.
How the inclusion works
For tax years through 2025, the inclusion was the CFC's tested income less a 10% routine return on tangible business assets (QBAI). A UK service company with little equipment had almost all its profit included. The US owner reports their share on Form 8992, drawing on Form 5471.
What changed from 2026
The July 2025 US legislation reworked the regime for tax years beginning after 31 December 2025: the QBAI offset is removed, the regime is renamed net CFC tested income, the section 250 deduction for corporate taxpayers (and individuals electing section 962) falls to 40%, and the deemed-paid foreign tax credit rises from 80% to 90% of the foreign tax. The high-tax exclusion threshold remains tied to 90% of the corporate rate (18.9%). Confirm the detail for your year in the Form 8992 instructions; we restate the position in writing each year.
Individuals pay more than corporations
A US corporation gets the section 250 deduction and the deemed-paid credit. An individual owner does not, unless they make a section 962 election to be taxed on the inclusion as if they were a corporation. With the election a UK company paying 25% corporation tax usually generates enough credit to cover the US tax on the inclusion; without it the owner pays at their marginal rate with only limited credit. The election's cost is a second layer of tax when the profit is later distributed, so it needs modelling.
The high-tax exclusion
Tested income taxed abroad at an effective rate above 18.9% can be excluded from the inclusion by annual election. A UK company paying the 25% main rate usually qualifies and the GILTI problem largely disappears, leaving Form 5471 as the main compliance cost. Companies at the 19% small-profits rate (profits under £50,000) sit just above the threshold and need the effective rate checked; marginal relief between £50,000 and £250,000 moves it.
Salary, dividends and timing
Director's salary reduces company profit and therefore the inclusion, and is earned income for the owner (relievable under the Foreign Tax Credit or FEIE). Dividends from a CFC interact with previously taxed income. The split should be set with both countries in view, not for UK efficiency alone.
Forms
Form 5471 for the company, Form 8992 for the inclusion, Form 1118 for the credit under a section 962 election, and the election statements themselves, all with the Form 1040.
Frequently asked questions
My company made a loss. Any inclusion?
No. Tested losses can offset tested income of other CFCs in the same year but do not carry forward.
Can the FEIE reduce GILTI?
No. The inclusion is not earned income.
Should I replace the UK Ltd with a US LLC?
Sometimes, but a US LLC owned by a UK resident creates a mismatch on the UK side. Structure is a joint US–UK question and should be modelled before any change.
Written by the US UK Expat Tax advisory team. Last reviewed 7 November 2026 · Figures relate to the 2025 and 2026 tax year unless stated.
Primary sources checked
General information, not personal tax advice. Rules and thresholds change; we confirm the position for your facts before any work.