US Insights

Global Intangible Low Taxed Income, or GILTI, was brought in as part of President Trump’s 2018 tax changes. Where previously, the Subpart F rules impacted CFCs with passive income, GILTI targets certain active trading companies as follows:

Global: US tax rules apply to its citizens’ worldwide income and gains as well as reporting of their worldwide interests.

Intangible: The target of these rules were foreign companies who derive profits from intangible assets. CFCs with tangible assets such as property and machinery would have a certain level of exclusion from GILTI based on the value of the assets. However, intangible assets include intellectual property and goodwill.

Therefore, many businesses that rely on these, such as personal services, are affected by GILTI.

Low-Taxed: For CFCs who pay high rates of Corporation Tax outside the US, these rules recognise that they should not be caught by GILTI. However, the calculation is complex and is sensitive to timing differences, book-to-tax adjustments and local tax breaks and rules.

Income: If profits are GILTI, it is taxable income to the US owner of the CFC.

So, if you have a farm where you have barns, plant, and machinery you have a lot of tangible assets, the profit that your farm generates will broadly be associated to those assets and may be excluded from being GILTI.

However, if you are a consultant or an accountant then your CFC will not have many fixed assets. Therefore, an amount of your company profit will be GILTI.

US individual owners of CFCs are taxed on their share of GILTI at ordinary income tax rates. They are also unable to offset the tax on GILTI with personal foreign tax credits meaning that US owners suffer double tax on the profits of the CFC considered GILTI.

What should you do next?

There are certain elections and exceptions that can apply to help US taxpayers minimise their US tax exposure to GILTI.

Firstly, is the income ‘high taxed’? In general, is it taxed at higher than 90% of the US corporate tax rate? The current US corporate tax rate is 21%, so high taxed is 18.9%. If high taxed, then there is an exception for GILTI. With the UK corporate tax rate at 19% and 25%, factors such as foreign exchange, and UK to US book-to-tax differences will determine whether the UK corporate tax for a particular year is in excess of 18.9%. Changes to corporate tax rates both sides of the Atlantic may change this scenario.

Secondly, the US person can make a deemed corporation election. This calculates the US tax on GILTI using corporate rather than personal tax rules. This can help minimise or even eliminate the US tax on GILTI but will need to be considered as part of review of their US taxes and future plans.

With GILTI being calculated on an annual basis, the above may apply and disapply year to year. The impact of GILTI each year may also differ, particularly for companies with brought forward corporate losses.

Net CFC Tested Income (NCTI)

From 1 January 2026, GILTI will be replaced by NCTI. This works very similar to GILTI, with one important change. The NCTI rules do not carve out profits related to tangible assets. Therefore, more controlled foreign corporations will be subject to the NCTI rules than the GILTI rules.

Some of the various rates and deductions within the calculation have changed, but the core considerations remain the same. Primarily, how much foreign corporate tax has been suffered in a calendar year and whether any of the tax elections can help a US shareholder eliminate additional US tax on their share of NCTI income.

US taxpayers may need to consider whether a CFC is the right structure for their business or whether to seek alternatives to avoid GILTI and NCTI entirely.

Want to Know More?

Personal tax is one of the most complex and sensitive aspects of wealth management and for US citizens with interests in the UK, the interaction between the two systems can be particularly challenging. Without the right advice, exposure to rules like GILTI and the upcoming NCTI can lead to unnecessary double taxation and a significant erosion of wealth over time.

At Blick Rothenberg, we are recognised leaders in US–UK cross-border taxation and non-UK domicile planning. Our dual-qualified advisers specialise in helping:

• Entrepreneurs and business owners navigating GILTI/NCTI exposure through international structures
• Executives and professionals with equity incentives, global income, or deferred compensation
• Families and trustees managing complex offshore or multi-jurisdictional arrangements

We’ll work with you to review your corporate and personal structures, identify risks under the GILTI and NCTI regimes, and develop strategies to reduce or eliminate unnecessary tax exposure while aligning with your long-term plans.

If you’d like tailored advice on how these rules affect you please get in touch with your usual Blick Rothenberg contact or use the form below and one of our US–UK tax specialists will be in touch.