Can I claim the section 250 deduction on Form 8993 as an individual?

Only if you make a section 962 election. The Form 8993 instructions on IRS.gov state that the deduction is allowed only to domestic corporations, excluding REITs, RICs and S corporations, and to section 962 electing individuals. A US individual who owns a UK limited company directly and makes no election reports the GILTI inclusion in full on Schedule 1 (Form 1040) and gets no part of the section 250 deduction.

Which figure carries from Form 8992 to Form 8993?

The GILTI inclusion on Form 8992, Part II, line 5 carries to Form 8993, line 22. The instructions also direct that Form 8992 be attached to the income tax return. That single figure is the only amount Form 8993 takes from Form 8992; everything else on Form 8993 Part III is computed on the form itself or drawn from Form 1118, Schedule A, column 3(b).

What are the section 250 deduction percentages after 2025?

The Form 8993 instructions state that for tax years beginning on or after 1 January 2018 and before 1 January 2026 the deduction is 37.5 percent of FDII plus 50 percent of GILTI, and that thereafter these deductions are reduced to 33.34 percent and 40 percent respectively. Always confirm the multiplier printed on the revision of Form 8993 that applies to the tax year you are filing.

Does UK corporation tax paid by my company reduce the US inclusion?

Not directly. UK corporation tax reduces the company's tested income because deductions including taxes are taken into account in reaching tested income on Schedule I-1 (Form 5471). Separately, the tax itself can generate a deemed paid credit under section 960(d) for a domestic corporation or a section 962 electing individual, claimed on Form 1118, Schedule D. GOV.UK sets the rates at https://www.gov.uk/corporation-tax-rates.

How does the taxable income limitation reduce the Form 8993 deduction?

If the sum of FDII and GILTI on line 23 exceeds taxable income on line 24, the excess on line 25 is split proportionately between the two on lines 26 and 27, and the statutory percentage is then applied to the reduced amounts on lines 28 and 29. The limitation cuts the base, not the deduction. Where there is no FDII, the whole excess falls on the GILTI side.

Form 8993 Section 250 Deduction: UK Company Owners

Q: Do I still file Form 5471 if the section 250 deduction wipes out the US tax?

Yes. Form 5471 is an information return and its filing obligation is independent of whether any tax is due. The Form 5471 instructions set out a penalty of 10,000 US dollars for each annual accounting period of each foreign corporation for failure to furnish the required information on time, with further penalties after IRS notice, capped at 50,000 dollars for each failure.

The Form 8993 section 250 deduction is the step that turns a raw GILTI inclusion from a UK limited company into the effective rate a US owner actually pays. Form 8993 does not decide whether you have an inclusion, and it does not compute one. It takes the inclusion figure that Form 8992 has already produced, applies a statutory percentage to it, and hands the result back to the return as a deduction. The IRS states the purpose plainly at https://www.irs.gov/instructions/i8993: use Form 8993 to figure the amount of the eligible deduction for FDII and GILTI under section 250. For a US citizen or green card holder who owns a UK trading company, that single deduction is very often the difference between a large US bill on profits that have never left the UK and no residual US tax at all. It is also the form most often skipped, because nothing on Form 5471 tells you it exists.

In the returns we prepare for US owners of UK limited companies, Form 8993 is where the whole cross-border computation finally resolves. Everything upstream of it is measurement. Form 5471 measures the company. Form 8992 measures the inclusion. Form 8993 is the first form in the chain that reduces anything. This article covers what section 250 allows and to whom, why the deduction reaches a section 962 electing individual but not a bare individual shareholder, the precise order in which the forms must be prepared and which figure carries from which line, the taxable income limitation that can quietly cut the deduction, and the statutory reduction in the deduction percentage for tax years beginning after 31 December 2025.

What is the Form 8993 section 250 deduction, and who can claim it?

The section 250 deduction is a deduction against the inclusion itself, not a credit against tax. Section 250 was enacted by Public Law 115-97, the Tax Cuts and Jobs Act of 2017, and it allows an eligible taxpayer to deduct a fixed percentage of two categories of income: foreign-derived intangible income, or FDII, and global intangible low-taxed income, or GILTI. Form 8993, revised December 2025 and available at https://www.irs.gov/pub/irs-pdf/f8993.pdf, is the only place that deduction is computed. The final regulations sitting behind it are T.D. 9901, published at 85 FR 43042 on 15 July 2020.

Eligibility is narrow and the instructions are unusually direct about it. All domestic corporations, and US individual shareholders of controlled foreign corporations making a section 962 election, must use Form 8993 to determine the allowable deduction under section 250. The instructions then close the door on everyone else: the deduction is allowed only to domestic corporations, not including real estate investment trusts, regulated investment companies and S corporations, and to section 962 electing individuals. Partnerships do not claim it either; a domestic corporate partner takes into account its distributive share of the partnership items and computes its own figure.

Domestic corporations: eligible, and they use the whole form.
Section 962 electing individuals: eligible, and this is the only route by which an individual reaches the deduction.
Individuals with no section 962 election: not eligible, at any income level.
S corporations, REITs and RICs: expressly excluded by the Form 8993 instructions.
Partnerships: do not claim the deduction; the domestic corporate partner does, using its distributive share.

Why an individual shareholder gets nothing from Form 8993 without a section 962 election

This is the single point that costs UK-resident American business owners the most money, and it is worth stating without hedging. A US individual who owns a UK limited company outright, files a Form 5471, files a Form 8992, and reports the resulting GILTI on line 8o of Schedule 1 (Form 1040) as the Form 8992 instructions at https://www.irs.gov/instructions/i8992 direct, has no access to the section 250 deduction. The inclusion goes into gross income at full value and is taxed at ordinary individual rates. No part of Form 8993 is available. The deduction is not withheld as a penalty; it simply was never extended to individuals in that posture.

The section 962 election is the bridge. It causes the electing individual to be taxed at corporate rates on amounts included under sections 951(a) and 951A, and with that treatment comes both the section 250 deduction and access to the deemed paid foreign tax credit. The Form 1118 instructions at https://www.irs.gov/instructions/i1118 confirm the mechanism: individuals must complete and attach a Form 1118 to their income tax return if they make the election under section 962 to be taxed at corporate rates on the amounts they must include in gross income under sections 951(a) and 951A, in order to be eligible to claim a foreign tax credit based on their share of foreign income taxes paid or accrued by the controlled foreign corporation. We publish a separate article on the section 962 election itself, and another on making the election inside a streamlined catch-up filing; this article assumes the election is on the table and concentrates on the form that gives it its value.

One practical detail almost never mentioned elsewhere. Part I of Form 8993 opens at line 1 with an instruction to enter the amount from Form 1120, line 11. A section 962 electing individual has no Form 1120. FDII is built from a domestic corporation's deduction eligible income, its qualified business asset investment and its foreign-derived receipts, and none of that describes an individual who owns a UK company. In practice, for a US owner of a UK trading company, the live entries on Form 8993 are in Part III, and the number that matters is on line 29.

Where Form 8993 sits in the chain from Form 5471 to Form 1118

Competitor guides describe these four forms one at a time, as if each were a standalone filing. They are not. They are a single computation split across four attachments, and figures move between them in one direction with two exceptions. Understanding the direction of travel is the whole skill.

It starts inside the UK company. Schedule I-1 (Form 5471), Information for Global Intangible Low-Taxed Income, is completed in the CFC's functional currency and then translated, and it is where the company's numbers are turned into GILTI inputs. Line 6 is tested income or loss. Line 7 is tested foreign income taxes, which for a UK limited company is the UK corporation tax charge properly attributable to that income. Line 8 is qualified business asset investment. Lines 9d and 10c are tested interest expense and tested interest income. The Form 5471 instructions at https://www.irs.gov/instructions/i5471 describe the schedule's job exactly: the information in this schedule will be used by the US shareholders of the CFC to file Form 8992, and may assist in the completion of Form 1118 or Form 1116.

In what order should Form 5471, Form 8992, Form 8993 and Form 1118 be prepared?

There is a correct order, and preparing out of order is how firms end up with a return that does not tie. The following is the sequence we work to on every UK company file, with the specific line-to-line carries that IRS.gov specifies.

Step 1. Complete Form 5471 for the UK company, including Schedule I-1. Tested income lands on line 6, tested foreign income taxes on line 7, QBAI on line 8.
Step 2. Complete Schedule A (Form 8992). Column (c) tested income and column (d) tested loss are both taken from line 6 of Schedule I-1 (Form 5471) for each CFC, with QBAI and the interest figures following from the same schedule.
Step 3. Complete Form 8992 Part I. Line 3 is net CFC tested income, the sum of the pro rata shares of net tested income less net tested losses. If line 3 is zero or negative you stop, and there is no Form 8993 entry.
Step 4. Complete Form 8992 Part II. Line 2 is deemed tangible income return, being the Schedule A column (g) total multiplied by 10 percent. Line 3c is specified interest expense. Line 4 is net DTIR. Line 5 is the GILTI inclusion.
Step 5. Carry Form 8992, Part II, line 5 to Form 8993, line 22. The Form 8993 instructions say so in terms, and add that Form 8992 must be attached to the return.
Step 6. Complete Form 1118, Schedule D, Part I. Column 5 is the pro rata share of the CFC's tested income taken from Schedule A (Form 8992) column (e). Column 8 is the CFC's tested foreign income taxes taken from Schedule Q (Form 5471), line 3, column (xii). Column 9 multiplies column 7 by column 8.
Step 7. Complete Form 1118, Schedule D, Part II. Column 1 is the GILTI inclusion from Form 8992, Part II, line 5. Column 2 is the inclusion percentage. Column 3 is the product of the Part I column 9 total and that percentage, and the instructions state that this column 3 amount is the section 78 gross-up, reported on Form 1118, Schedule A, column 3(b).
Step 8. Return to Form 8993, line 29. Subtract the line 27 GILTI reduction from the line 22 inclusion, add the section 78 dividend attributable to GILTI from Form 1118, Schedule A, column 3(b), and apply the statutory percentage.
Step 9. Report the result. Lines 28 and 29 of Form 8993 both read: enter here and on Form 1120, Schedule C.

Steps 6 to 8 are the part nobody sets out, and they are the reason a Form 8993 prepared in isolation is almost always wrong. The GILTI deduction on line 29 is not a straight percentage of the Form 8992 inclusion. It is a percentage of the inclusion plus the section 78 gross-up, and the gross-up can only be quantified once Form 1118 Schedule D has been run. The chain doubles back on itself once, and that is the doubling-back that gets missed.

How Part III of Form 8993 actually computes the deduction

The December 2025 revision of Form 8993 has three parts and twenty-nine lines. Several ranking pages still describe it as having four parts, which is a useful signal about how closely those pages have looked at the form. Part I determines deduction eligible income and deemed intangible income. Part II determines foreign-derived deduction eligible income. Part III determines the FDII and GILTI deductions, and for a UK company owner it is where the work is.

Line 21 is FDII. Line 22 is the GILTI inclusion from Form 8992. Line 23 adds them. Line 24 is taxable income, which the instructions define as the taxable income of the domestic corporation determined without regard to section 250. Line 25 subtracts line 24 from line 23. Lines 26 and 27 are the reductions that flow from any excess. Line 28 applies the FDII percentage to the reduced FDII figure, and line 29 applies the GILTI percentage to the reduced inclusion after the section 78 gross-up has been added. Everything on the form exists to feed lines 28 and 29.

It is worth noting what Part I excludes on the way through, because it explains why a domestic corporation cannot count the same income twice. Line 2 strips out amounts included under section 951(a)(1) and under section 951A, together with the section 78 gross-up on each; financial services income; dividends from a CFC in which the corporation is a US shareholder; domestic oil and gas extraction income; and foreign branch income. Public Law 119-21 added two further exclusions at lines 2g and 2h, for income and gain on the sale or other disposition of intangible property as defined in section 367(d)(4), and of other property of a type subject to depreciation, amortization or depletion by the seller. Those apply to dispositions occurring after 16 June 2025 and do not extend to a lease or a licence.

What is the taxable income limitation on Form 8993?

The taxable income limitation is the trap that turns a projected deduction into a smaller one. The rule, stated in the instructions, is that if the sum of FDII and GILTI exceeds taxable income, the deduction under section 250 is limited to taxable income. The point is that the deduction cannot manufacture or enlarge a loss. If the inclusion is large relative to the taxpayer's overall taxable income, the base to which the percentage is applied shrinks before the percentage is ever applied.

The mechanics run through lines 25 to 27. Line 25 is the excess of line 23 over line 24. If it is zero or negative, the deduction is not limited and lines 26 and 27 are zero. If it is positive, the excess is split between FDII and GILTI in proportion to each. Line 26, the FDII reduction, is the excess multiplied by FDII divided by the sum of FDII and GILTI, which on the form is line 21 divided by line 23, multiplied by line 25. Line 27, the GILTI reduction, is simply the excess less the FDII reduction. Where there is no FDII, as is normal for a US owner of a UK company, the entire excess falls on GILTI and line 27 absorbs all of it.

Two practical consequences follow. First, the limitation is applied to the base, not to the deduction, so a taxpayer who models it as a haircut on the final deduction figure will overstate the reduction. Second, because line 24 is taxable income determined without regard to section 250, other deductions taken on the return can pull line 24 down and enlarge the excess. In a section 962 context the instructions speak in corporate language throughout, and the figure entered on line 24 needs to be the taxable income taken into account under the election rather than the individual's overall taxable income. That is a point to get right on the working papers and to document, because the form itself does not spell it out for an individual filer.

What changes for tax years beginning after 31 December 2025?

The percentages are changing, and the change is statutory rather than a matter of interpretation. The Form 8993 instructions state the position for both periods in a single sentence: for tax years beginning on or after 1 January 2018 and before 1 January 2026, section 250 generally allows a deduction equal to the sum of 37.5 percent of the corporation's FDII plus 50 percent of its GILTI, and thereafter these deductions are reduced to 33.34 percent and 40 percent respectively. Those figures are on IRS.gov at https://www.irs.gov/instructions/i8993 and are the ones we work to.

So the deduction on line 29 of Form 8993 falls from half the inclusion to two fifths of it. The line 28 and line 29 instructions for the December 2025 revision still carry the 37.5 percent and 50 percent multipliers, because that revision is written for tax year 2025; the instructions describe themselves as a continuous use revision, to be used for tax year 2025 and subsequent years until a superseding revision is issued. Check the multiplier on the current revision before you compute a later year, rather than assuming the printed figure is the one in force.

There is a second, offsetting change on the credit side. IRS Notice 2025-77, published at https://www.irs.gov/pub/irs-drop/n-25-77.pdf, records that Public Law 119-21 changed the section 960(d)(1) reduction from 20 percent to 10 percent, so a larger proportion of the CFC's tested foreign income taxes becomes creditable. The same notice explains new section 960(d)(4), added by section 70312(b) of Public Law 119-21, 139 Stat. 72 (4 July 2025), which disallows a foreign tax credit for 10 percent of any foreign income taxes paid or accrued, or deemed paid under section 960(b)(1), with respect to amounts excluded from gross income under section 959(a) by reason of a section 951A inclusion. That disallowance is now reported on Form 1118, Schedule G, line H. Read together, the direction of travel is a smaller deduction against the inclusion and a larger deemed paid credit against the tax on it. For a UK company paying substantial UK corporation tax, that combination is not obviously worse; for a low-taxed CFC it plainly is.

What is the section 250 deduction worth when the UK company already pays UK corporation tax?

This is the question a UK-based owner actually asks, and it is the one the American-market guides do not answer, because they are written as though the CFC sits in a zero-tax jurisdiction. A UK limited company is not a low-tax vehicle. GOV.UK sets out the rates at https://www.gov.uk/corporation-tax-rates: from 1 April 2023 the main rate is 25 percent on profits over 250,000 pounds, the small profits rate is 19 percent on profits of 50,000 pounds or less, and Marginal Relief applies between those limits, as explained at https://www.gov.uk/guidance/corporation-tax-marginal-relief. A profitable UK trading company is therefore paying UK tax at or approaching the US corporate rate before any US computation begins.

An illustration, using assumed figures only and no exchange rate conversion, so the arithmetic is visible. Assume a UK limited company wholly owned by a US citizen resident in the UK, with tested income for the year of 500,000 US dollars and no meaningful qualified business asset investment, so that the deemed tangible income return is negligible and the GILTI inclusion on Form 8992, Part II, line 5 is 500,000. Assume tested foreign income taxes of 125,000, consistent with UK corporation tax at the main rate, and an inclusion percentage of 100 percent. A section 962 election is in place, so Form 8993 is available.

Form 8993, line 22: GILTI inclusion of 500,000, carried from Form 8992, Part II, line 5.
Form 1118, Schedule D, Part II, column 3: section 78 gross-up of 125,000, being the pro rata tested foreign income taxes multiplied by the inclusion percentage, reported on Form 1118, Schedule A, column 3(b).
Form 8993, line 29 base: 500,000 plus 125,000, giving 625,000, assuming no taxable income limitation applies.
Form 8993, line 29 deduction at 50 percent: 312,500, leaving 312,500 subject to tax at the corporate rate under the section 962 election.
Form 1118, Schedule D, Part II, column 4: tax deemed paid of 100,000, being the 125,000 in column 3 multiplied by 80 percent as printed on the December 2025 revision of the form at https://www.irs.gov/pub/irs-pdf/f1118.pdf.

Now show the same illustration with the taxable income limitation biting. Suppose taxable income on line 24, determined without regard to section 250, is 400,000 rather than 625,000. Line 25 is an excess of 225,000. There is no FDII, so line 26 is nil and line 27 absorbs the whole 225,000. Line 29 is then computed on 400,000 rather than 625,000, giving a deduction of 200,000 rather than 312,500. The percentage never changed. The base did. That is exactly the distinction that gets lost when the limitation is modelled as a reduction in the deduction itself.

How the section 250 deduction and the deemed paid credit divide the work

A recurring misconception is that the section 250 deduction and the deemed paid credit are alternative reliefs for the same problem, so that claiming both is somehow double counting. They are not, and they are not doing the same job. The section 250 deduction operates on the base: it removes a statutory percentage of the inclusion, plus the gross-up, from the amount subject to tax. The section 960(d) deemed paid credit operates on the tax: it offsets US tax computed on that reduced base with a portion of the UK corporation tax the company has already paid. One shrinks the pot, the other pays part of the bill on what is left.

The section 78 gross-up is the hinge between them, and it is where the two reliefs are reconciled rather than duplicated. Because the credit treats foreign tax as though the US shareholder had paid it, the same amount must be brought into income, and Form 8993 line 29 requires exactly that: add the amount treated as a dividend under section 78 attributable to GILTI, from Form 1118, Schedule A, column 3(b), before applying the percentage. Note the asymmetry, which is easy to miss and which we see mishandled regularly. The section 78 gross-up in Form 1118, Schedule D, Part II, column 3 is the full pro rata tested foreign income taxes multiplied by the inclusion percentage. The tax actually deemed paid in column 4 is that figure after the statutory reduction. The amount added to income and the amount credited are deliberately different numbers, and using one for both is a real error, not a rounding point.

The practical UK conclusion is that in a well-taxed UK trading company the deduction and the credit together will often extinguish the residual US charge on the inclusion, subject to the separate section 904 limitation computed on Form 1118 for the relevant separate category. That is not a reason to skip either form. It is a reason to prepare both correctly, because the result you are trying to reach and evidence is nil residual tax rather than nil filing. Where the UK company's effective rate is high enough, the GILTI high-tax exclusion may make the whole inclusion disappear before Form 8993 is reached; we cover that election in a separate article, and it is worth testing before defaulting to a section 962 election.

The Form 8993 failure modes we see most often

Filing Form 5471 and Form 8992 and stopping there, with no section 962 election and therefore no route to the deduction at all.
Applying the section 250 percentage to the Form 8992 inclusion alone, without adding the section 78 gross-up from Form 1118, Schedule A, column 3(b).
Treating the section 78 gross-up and the tax deemed paid as the same figure, when Form 1118, Schedule D, Part II uses columns 3 and 4 for two different amounts.
Applying the taxable income limitation to the deduction rather than to the base, and overstating the reduction as a result.
Using the wrong statutory percentage because the printed multiplier on an older revision of the form was assumed to apply to a later tax year.
Preparing Form 8993 before Form 1118 Schedule D, so that line 29 cannot be completed and the chain has to be reworked.
Omitting Form 8992 as an attachment, when the Form 8993 line 22 instruction expressly directs that it be attached to the return.

Filing, attachment and correction rules

Form 8993 is attached to the income tax return, and both are filed by the due date for that return including extensions. If a Form 8993 is later found to be incomplete or incorrect, a corrected Form 8993 is filed with an amended return, following the amended return instructions for the return with which the original was filed, and Corrected is entered at the top of the form. Form 8992 is attached in the same package.

The compliance risk sits upstream, on Form 5471 rather than Form 8993. The Form 5471 instructions set out a penalty of 10,000 US dollars for each annual accounting period of each foreign corporation where the information required by section 6038(a) is not furnished within the time prescribed, with a further 10,000 dollars for each 30-day period, or fraction of one, once 90 days have passed after the IRS has mailed notice of the failure, capped at 50,000 dollars for each failure. That is the exposure that makes the whole chain worth preparing properly, and it is the reason we treat the Form 5471 schedules as the foundation of the file rather than an afterthought to the return.

What this means for a UK company owner this filing season

If you are a US citizen or green card holder who owns a UK limited company, the sequence to work through is short. Establish whether the company is a CFC and whether you have a Form 5471 obligation. Compute tested income and tested foreign income taxes on Schedule I-1. Run Form 8992 and see whether there is an inclusion at all. If there is, test the high-tax exclusion, and if that does not remove the inclusion, price a section 962 election and, with it, the Form 8993 section 250 deduction and the deemed paid credit on Form 1118. Prepare the forms in the order set out above, not in the order they happen to be numbered.

Our cross-border tax preparation work for owners of UK companies is set out at https://us-uktax.com/cross-border-tax-planning, our corporate compliance work at https://us-uktax.com/business-corporate-tax-planning, and our US and UK filing services at https://us-uktax.com/us-tax-services and https://us-uktax.com/uk-tax-services. If a UK company has been sitting outside the US filings for several years, the Form 5471 exposure is usually the first thing to quantify, and a catch-up route should be scoped before any single year's Form 8993 is prepared. This article is general information about US and UK tax compliance and reporting, not advice on any particular set of facts; verify every figure against the current revision of each form on IRS.gov before filing.