Possible refund of 'social charges' on investment income for S1 holders

[parsnips]

Hi,

I have just read in the BDO (tax consultants’) bulletin that there is a

case at the ECJ (EU Pilot 5973/2013) contesting the application of

french ‘social charges’ to the investment income of french resident UK

state pensioners (with S1) on the same grounds that their pensions are

exempted , ie. that as the proceeds of these impositions are ring fenced

to finance specific social services , and EU reg. 1408/71 states that

no-one can be subject to more than one social security system, then S1

holders cannot be made to finance the french health system through these

contributions.

We are advised , if we wish to get a refund for CSG etc. paid in

2012 (in the event that France loses the case) the deadline for a

provisional appeal , in writing , or by email , is 31 Dec 2014.

There is a similar ongoing case concerning tax and social charges on

house sales and rents of non-residents which is also subject to a

31/12/2014 deadline for provisional claims for refund.

[NormanH]

In other words UK

state pensioners (with S1) who don't pay NI charges in the UK will not have to pay anything at all towards the social security system in France either, despite being potential users of the system, whereas French pensioners who have already paid all their working lives into their system continue to pay the social charges which finance that system.

Health tourism ?

[YCCMB]

I think there's a bit of unfair comparison here. AFAIK, the French mandatory state pension provision is based on earnings, not a one-sum-fits all payment. If it's big, or supplemented by other private pension payments, and exceeds certain limits, it's taxable. At this point, I assume there are social charges to pay.

If you're a French resident, and in receipt of UK state and private pension, you get taxed in France on the same basis as French residents, unless your private pension is a public sector one.

If you're a non resident with a second home in France, you have no reason to pay into the French system for healthcare, and no reason to donate a fat slice of the proceeds of the sale of your second home to fund French healthcare or anything else, because you're funding the UK system through your taxes already and the imposition of the tax in France is being made without you being able to derive any benefits from your contribution

I'm not sure in all this where the UK citizen with an S1 is getting a free ride, but maybe it's just me.

[woolybanana]

Hang on, Norman, doesnt the S1 cover mean that the UK govt pays either a lump sum of 3000 euros to France per head or pays the actual sums involved. Whichever, you can hardly say that the average UK pensioner is taking anything much out of the French system, though one way of the UK paying may be more of a gamble than the other for the French.

Dunno if most French taxpayers are paying as much as 3000 euros in social charges either.

[parsnips]

[quote user="woolybanana"]Hang on, Norman, doesnt the S1 cover mean that the UK govt pays either a lump sum of 3000 euros to France per head or pays the actual sums involved. Whichever, you can hardly say that the average UK pensioner is taking anything much out of the French system, though one way of the UK paying may be more of a gamble than the other for the French.

Dunno if most French taxpayers are paying as much as 3000 euros in social charges either.[/quote]

Hi,

     In fact the system is that the UK government pays to the french government the whole amount of each individual pensioner's fees which would otherwise (for a french national) be covered by the securité sociale.  So the UK pensioner takes nothing from the french state.

    As for not paying NI on our pensions , the UK system is that you are deemed to have paid your dues during your working life, and so , unlike France , you are not made to pay for the pension you are receiving, out of that same pension.

[NormanH]

[quote user="You can call me Betty"]I think there's a bit of unfair comparison here. AFAIK, the French mandatory state pension provision is based on earnings, not a one-sum-fits all payment. If it's big, or supplemented by other private pension payments, and exceeds certain limits, it's taxable. At this point, I assume there are social charges to pay.

If you're a French resident, and in receipt of UK state and private pension, you get taxed in France on the same basis as French residents, unless your private pension is a public sector one.

If you're a non resident with a second home in France, you have no reason to pay into the French system for healthcare, and no reason to donate a fat slice of the proceeds of the sale of your second home to fund French healthcare or anything else, because you're funding the UK system through your taxes already and the imposition of the tax in France is being made without you being able to derive any benefits from your contribution

I'm not sure in all this where the UK citizen with an S1 is getting a free ride, but maybe it's just me.[/quote]

French pensioners pay social charges from the first euro of the pension.

The health system is funded specifically from côtisations not from general taxation so no tax paid by British residents goes towards the health system.

At the same time British pensioners don't pay NI contributions, so they are paying nothing for the care they receive  whereas French pensioners do.

Please look carefully at my OP where I made this point. It is not a question of what British OAPS do or don't cost France, it is the fact that they don't pay that I commented on

To me this is a free ride, and an insulting  slap in the face for  the retired population of the country  that has paid for the establishments and personnel that treat them

[woolybanana]

They are paid for by the British government via the S1, Norman.

[woolybanana]

And, the S1 holders are expatriates, Norman, not immigrants.

[idun]

I am not sure how this works. I really thought that the french government paid the UK government a fixed sum for the likes of us, but the UK government were charged au fur et a mesure, for british pensioners.

Have I got this the wrong way round? I hope I haven't.

The reason I hope this is that it is not in the culture to 'cost' each patient in the UK, whereas it is in France. AND if it is wrong, then I need to make sure that everything we use, is being charged to the french, after all, we still pay cotisations there.

[woolybanana]

There is inter-governmental discussion apparently as to whether the UK govt should pay a fixed sum or actual costs of treatment.

Apparently the French prefer the former whereas the UK wants the latter.

[NormanH]

[quote user="woolybanana"]They are paid for by the British government via the S1, Norman.[/quote]

Yes Paid for; not pay.

Exactly my point. They are getting a free ride.

[woolybanana]

Not at all, Norman; the British system being less savage than the French one, says that retirees have paid the social charges within their working life and do not continue to pay in retirement. It is simply a difference betewwn systems.

Proves we are expats, not immigrants. You only become the latter when you are treated exactly as the hosts and HAVE THE VOTE!

[YCCMB]

And furthermore, if you're living somewhere, whether you're an expat or an immigrant, the one thing you aren't is a tourist, so it may offend your sensitivities on all sorts of levels, Norman, but it can't be classed as health "tourism" can it?

[YCCMB]

[quote user="NormanH"][quote user="You can call me Betty"]I think there's a bit of unfair comparison here. AFAIK, the French mandatory state pension provision is based on earnings, not a one-sum-fits all payment. If it's big, or supplemented by other private pension payments, and exceeds certain limits, it's taxable. At this point, I assume there are social charges to pay.

If you're a French resident, and in receipt of UK state and private pension, you get taxed in France on the same basis as French residents, unless your private pension is a public sector one.

If you're a non resident with a second home in France, you have no reason to pay into the French system for healthcare, and no reason to donate a fat slice of the proceeds of the sale of your second home to fund French healthcare or anything else, because you're funding the UK system through your taxes already and the imposition of the tax in France is being made without you being able to derive any benefits from your contribution

I'm not sure in all this where the UK citizen with an S1 is getting a free ride, but maybe it's just me.[/quote]

French pensioners pay social charges from the first euro of the pension.

The health system is funded specifically from côtisations not from general taxation so no tax paid by British residents goes towards the health system.

At the same time British pensioners don't pay NI contributions, so they are paying nothing for the care they receive  whereas French pensioners do.

Please look carefully at my OP where I made this point. It is not a question of what British OAPS do or don't cost France, it is the fact that they don't pay that I commented on

To me this is a free ride, and an insulting  slap in the face for  the retired population of the country  that has paid for the establishments and personnel that treat them

[/quote]

And I am quite aware of the difference between tax and cotisations, but the point is that France wants to ring fence cotisations to pay for the health service, or at least part of them, and Nationals of other EU member states have or still are paying for their own health service through their own systems, if the French health service were not in such dire financial straits, it wouldn't have to be shored up by having to force such high contributions on people. Why should France try to gain additional funds by charging people who are already (or have already...given that UK pensioners don't pay NI ) paying elsewhere.?

I have little knowledge of how this might work in other EU countries, but if the UK takes the view that pensioners should be exempt from NI contributions, that's a stroke of luck for them..maybe nationals of the other countries still pay similar charges and hence are paying twice if they are also clobbered with the French payments too. In which case, who exactly is slapping whom in the face?

[parsnips]

[quote user="woolybanana"]There is inter-governmental discussion apparently as to whether the UK govt should pay a fixed sum or actual costs of treatment.

Apparently the French prefer the former whereas the UK wants the latter.[/quote]

Hi,

    Originally it was an individual account for each pensioner , then it was changed to a fixed amount , and then a couple of years ago it went back to individual accounts.

[NormanH]

The idea that UK pensioners don't pay NI is based on a calculation that their contributions during their working lives would be enough to cover their needs in the UK once retired, that is the costs of the NHS.

It  was not intended that the higher costs of the French system should be paid for out of this.

British retired people in France with an S1 are getting a more expensive system (arguably less efficient, but that is a red herring) paid for by those in the UK who are still paying NI contributions and taxes.

That to me is a free ride.

I do not note any pressure for a "5 year rule" to say that once one has lived in France for 5 years one should have the some rights as French people including the duty to pay for the health system.....[:P]

[woolybanana]

Norman, afraid you are wrong on this one, old chap; the S1 buys medical goods and services from an existing system with, presumably, a built in element as a contribution for running costs, development etc. The S1 is a right built into the individual's contribution record which would be mirrored in some way if they were in UK, though I don't know if an amount could be attributed as it used to be.

I don't see where the free ride comes from as we are paying fo what we get, not into a system. Remember, we are expats, expats, with reduced, even nominal rights which have been negotiated over our heads by treaty and law; we are not citizens of France, though we could choose to be.

By the way, have yoy taken French citizenship in solidarity with the downtrodden of France?

[idun]

No!

National Insurance contributions are obviously a magic trick that I do not understand...... at all.

What are they for?

Well I have been told........ Pensions!

Now......... they are health care too?

They are such a small amount that they hardly cover any of this, so they cannot in reality be covering an S1 and a pension......

If I go mad about french cotisations, at least everyone knows what they are paying for and no one believes that everything is covered for ever, in spite of paying more in when working.

ps, expats, well, no one made anyone move....... so reduced rights are what they are and IF they don't suit.... move back 'home', because one knows one's entitlements there.

[YCCMB]

idun..NI contributions very with salary and The employer/employee rates are here: https://www.gov.uk/national-insurance-rates-letters/contribution-rates

They pay for the NHS, pensions and things like sickness benefit and other benefits.

I'd rather have the reduced rights than pay a small fortune into a system where I was never going to derive any benefit at all from my contributions.

[idun]

I know, former pay clerk me.... so I do know about this sort of thing. But the truth is that it is not a lot, about £79 pw on an £805 pw gross income and then 2% over that. I actually do not know many people who earn that much and ofcourse they will pay a lot less.

[YCCMB]

Not bad, around 140-170k over say 35 years. And that's without the employer's contribution.

It's about 107 million pounds for 2013/14. Not too shabby.

[idun]

WOW betty, to pay that much into the system, one would have to be a high earner and I don't know many people who would be earning anywhere near that. A good friend, M.Sc reckons that where she works she is a high earner and only gets £27000 a year, nowhere near £42K.

The average wage is only about £25K which would be around £72k NI for 35 years work, which would easily be swallowed up with the pension within 10 to 15 years. So let us say that the employers part pays for health care. Because, whether we use it or not, it has to be there and that bit could easily be swallowed up by a family during the working life.

It is what it is, but more is paid in France, that is for sure and no matter the age, most have to continue contributing.

[lindal1000]

I think it's quite difficult to compare the two systems. Britain has low social charges and higher tax, whereas France has high social charges but lower tax (at least for those on lower incomes). I think a few more rulings like this will encourage all countries to do away with the two different systems for collecting money and just have one system of progressive taxation. France has wanted to combine taxation and social charges under both governments but I think there are too many vested interests and it would be a very complex thing to work out (but would in fact save them a fortune in collection costs). Similarly combining taxation and NI in uk would save money in the long term and would perhaps make the systems of deductions seem fairer.

[YCCMB]

But Idun, you're still not taking the employers contribution into account. Nor the fact that about 30% of the UK population lives in the South East, where wages are higher and thus contributions are often more.

The other thing to bear in mind is that the benefits part of NI is largely untouched by "high earners" - even if they become unemployed. If they have savings or even a spouse who is working and also a high earner, they won't get most of the benefits that low earners can access. All right and proper and as it should be, but those on high incomes and paying higher levels of NI are paying in more than they will likely ever receive from the system.

As Norman has noted, I baulk at separating the terms "tax" and "NI". However you dress it up, they're both taxes. Just that the latter is ring fenced for particular uses, which is what the current argument is all about. If a foreign resident in France is liable to pay tax, then the French government is perfectly entitled to spend those taxes wherever it sees fit. If, on the other hand, it is on record as spending a particular set of receipts on a specific thing ( health) and foreign nationals are or have been making contributions elsewhere and can't access the services they're paying for on an equal footing, or indeed their already-paid taxes are funding their healthcare, then it doesn't seem illogical or unreasonable to make them pay twice purely because they aren't born in that country.

In any case, it's an EU-wide ruling, so whilst foreign residents in France are slapping France in the face, French residents in other EU countries are slapping them back, non?

[idun]

Ah but I did take it into account, on say an average wage of £25k the current employers part is approx £2350, the employee just over £2000 per year. And I did say that the employers contribution would probably pay for health care.

I remember well someone we were friendly with, about 20 years older than us, going mad about his UK state pension, in the next breath saying that in the 60's he earned £4 a week going up to £15 a week, so just how many pennies did he pay in for the first ten years when he was paying in? How little the following ten years and there after. I am very aware of how this works and in fact the UK pension for most is very good value.

Both systems are very different on that we agree.