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tax on property in the UK


caroline
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I dont know if anyone will have been in this situation but if so, or if someone can shed some light on this, i would appreciate it. Thank you for all comments.

I usually fill in a tax form in the UK for a property there which is let, but as I have now been working very part-time in France but on a contract (about 30 hrs a month) I have I think become officially resident here. In which case, I am told that tax has to be deducted from rental income at source at 20%.  Now I looked on the government tax pages and it seems to suggest that there is an alternative to fill out a self assessment tax form (which is what I did in the past, in the UK). However can someone confirm this, because at present I dont know what forms I need to fill in to do so, or who to speak to, or how to avoid paying tax in the UK and in France, and in effect thinking I wonder why I didn't do this before...........so, well you know how it is, with all the many things there are to learn about

so thank you for any advice or suggestions !!

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You have to apply to HMRC to continue to do self assessment on UK rental income if you live abroad, they then provide approval to pass onto the letting agents.  Without this HMRC approval, it is the letting agents who have to deduct the 20%.  We did/do just this.
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Hi,

      In no circumstances will your rental income from a UK property be taxable in France,under the provisions of the UK/France double taxation treaty. However, if you are tax resident in France you should declare the rent on forms 2042 and 2047 as income not taxable in France but to be taken into account when calculating your french tax rate. Next April/ May when the french declaration is due you can get more detailed advice on filling it here on the forum.  

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[quote user="parsnips"]

Hi,

      In no circumstances will your rental income from a UK property be taxable in France,under the provisions of the UK/France double taxation treaty. However, if you are tax resident in France you should declare the rent on forms 2042 and 2047 as income not taxable in France but to be taken into account when calculating your french tax rate. Next April/ May when the french declaration is due you can get more detailed advice on filling it here on the forum.  

[/quote]

Is there still a loophole that means that income from a UK property rental can be free of tax then if you are French resident for tax purposes? I understood that this was being closed.
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[quote user="oldgit72"][quote user="parsnips"]

Hi,

      In no circumstances will your rental income from a UK property be taxable in France,under the provisions of the UK/France double taxation treaty. However, if you are tax resident in France you should declare the rent on forms 2042 and 2047 as income not taxable in France but to be taken into account when calculating your french tax rate. Next April/ May when the french declaration is due you can get more detailed advice on filling it here on the forum.  

[/quote]

Is there still a loophole that means that income from a UK property rental can be free of tax then if you are French resident for tax purposes? I understood that this was being closed.[/quote]

Hi,

     I don't know of a "loophole" as such, but what often happens is that where a UK citizen is french resident ,and all their other income is taxed in France, they have enough UK personal allowances to cover their UK rental income. It is sometimes useful to either share or transfer ownership of the UK house between spouses in order to make maximum use of un-used UK personal allowances.

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Hi

By UK personal allowances, do you mean the amount you can earn before you become liable for tax ? I think it used to be about £4,200 ??  Is it still the same regulation if you live abroad ? I'm just wondering because the from says you must not expect to be liable for tax on your UK property I think, in order to be able to fill out a self assessment form - In fact I see you must fulfill one of three possible requirements, one being not liable for tax on the income from the property.

Thank you

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My understanding is that your UK property rental income is taxed in the UK, but you have to declare it for the calculations for tax and social charges in France. If you register as a professional landlord in France than that situation changes. The loop hole that will close relates to the CGT on sale of UK property. Currently you can sell and providing certain conditions are met you will not pay CGT. After the signing of the new treaty my understanding is that French taxation rules will apply if you are French resident on the gain.

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[quote user="caroline"]

Hi

By UK personal allowances, do you mean the amount you can earn before you become liable for tax ? I think it used to be about £4,200 ??  Is it still the same regulation if you live abroad ? I'm just wondering because the from says you must not expect to be liable for tax on your UK property I think, in order to be able to fill out a self assessment form - In fact I see you must fulfill one of three possible requirements, one being not liable for tax on the income from the property.

Thank you

[/quote]

Hi,

     Yes, UK citizens abroad are entitled to their personal tax allowance (tax-free income) in the UK, this is currently £6475 pa. If your rental income is less than that you have no tax to pay.

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There is still a loophole between UK/France on capital gains for a French resident when selling a property in the UK and on rental income from a UK property.

Rental income is taxable in the UK but personal allowances can be set agaist this. The French cannot tax this income.

Capital gains on the sale of a UK property by a French resident is not taxable in the UK nor is it taxable in France.

However a new UK/France Double Taxation Treaty was signed on 19 June 2008 and should come into force in 2009 (for details of this google new UK/France Double Taxation Treaty).

This treaty will allow The French to tax any capital gains on the sale of a UK property and it appears to me, that in the case of rental income in the UK, this will not be taxable in the UK but will be taxable in France,

This change on rental incomes, if correct, will be expensive as you will not be able to set your personal allowance against such tax in France and the tax in France for rental income can be expensive

.

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[quote user="Malaucene"]

There is still a loophole between UK/France on capital gains for a French resident when selling a property in the UK and on rental income from a UK property.

Rental income is taxable in the UK but personal allowances can be set agaist this. The French cannot tax this income.

Capital gains on the sale of a UK property by a French resident is not taxable in the UK nor is it taxable in France.

However a new UK/France Double Taxation Treaty was signed on 19 June 2008 and should come into force in 2009 (for details of this google new UK/France Double Taxation Treaty).

This treaty will allow The French to tax any capital gains on the sale of a UK property and it appears to me, that in the case of rental income in the UK, this will not be taxable in the UK but will be taxable in France,

This change on rental incomes, if correct, will be expensive as you will not be able to set your personal allowance against such tax in France and the tax in France for rental income can be expensive

.

[/quote]

Hi,

    Having checked the treaty I find nothing to indicate that rental income from the UK will be taxable in France; Art. 6 paras 1 and 3.  

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Hi,

I have seen various conflicting opinions on this so this morning I phoned the UK Inland Revenue non residents dept at  Bootle (00441514726009). They advised that when the new treaty comes into force capital gains on the sale of UK property owned by a French resident will be taxed in France but rental income would still be dealt with in the UK.

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Rental income will still be taxed in France after the treaty. However it must be declared in France to determine tax bands.

If however a person is or wishes to be classified as a professional landlord then the rental income is taxed in France. In order to be classified as a prof landlord the income must be a certain amount and make up more then 50% (?) of total income

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[quote user="Aly"]

Rental income will still be taxed in France after the treaty. However it must be declared in France to determine tax bands.

If however a person is or wishes to be classified as a professional landlord then the rental income is taxed in France. In order to be classified as a prof landlord the income must be a certain amount and make up more then 50% (?) of total income

[/quote]

Hi,

     I take it you meant to write"rental income will still NOT be taxed in France after the treaty"?  And I think you will find that any rental income drawn from a property in the UK will still be taxed there.

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Yes sorry should have said not be taxed in France.

If you register as a professional landlord in France for your UK property than I believe the property will be taxed in France or you will be afforded credits. The advantage is that your property is then exempt from French wealth tax but you will have to pay local professional taxes. You need to meet certain criteria to register and it may not be advantageous to all.

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Is the definition of "net rental income" from UK properties the same for tax purposes in France as in the UK? In the UK we decalre the net profit from our annual property rental trading accounts, after deducion of expenses and whatever else our accountant feels is justified.

I ask the question, as I believe that the French authorities will not allow many of the deductions it is possible to take into account in the UK in calculating Capital Gains Tax. Here I am thinking perhaps of material costs incurred directly by a property owner rather than through an artisan. Are the deductions on UK rental income viewed the same way in calculating the paper figure for the French tax return, or will they accept the net profit declared under the UK accounts?

A further issue might be, what the French will allow on UK sales subject to French CGT under the new treaty?
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[quote user="frexpt"]Is the definition of "net rental income" from UK properties the same for tax purposes in France as in the UK? In the UK we decalre the net profit from our annual property rental trading accounts, after deducion of expenses and whatever else our accountant feels is justified.

I ask the question, as I believe that the French authorities will not allow many of the deductions it is possible to take into account in the UK in calculating Capital Gains Tax. Here I am thinking perhaps of material costs incurred directly by a property owner rather than through an artisan. Are the deductions on UK rental income viewed the same way in calculating the paper figure for the French tax return, or will they accept the net profit declared under the UK accounts?

A further issue might be, what the French will allow on UK sales subject to French CGT under the new treaty?[/quote]

Hi,

      Taking your 2nd question first; the french will apply their existing rules to CGT on UK house sales ie. (briefly)   no tax on principal residence -if sold within 1 yr of vacating(currently- exceptionnally 2yrs) 1000€ fixed reduction on all sales, 10% reduction in taxable gain for each year of ownership beyond 5 yrs. No tax on sales under 15 000€.

As for rental income: There are several "regimes"  the" réel" where you keep accounts and can claim for expenses including work to maintain and improvement , but not extension or enlargement . Work done by contractors can be claimed in full based on bills. If you do it yourself you can claim only for materials, and if you employ a workman-his wages.

       In the "micro-foncier" regime you get a 30% allowance off of the gross rent which is deemed to cover all your expenses.

;

This only a very brief note--for details of the system Look at the website of www.leparticulier.fr and look at the special "impots" issue 2009 .

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Will it be necessary therefore to maintain both UK accounts and French accounts for UK properties for calculation of rental profit and CGT?

The UK situation is the same in that extension & enlargement generally will be set against CGT, rather than rental income, but so will own-purchased materials used in such projects. Am I wrong in believing that own-purchased materials are not deductable against CGT in France?
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[quote user="frexpt"]Will it be necessary therefore to maintain both UK accounts and French accounts for UK properties for calculation of rental profit and CGT?

The UK situation is the same in that extension & enlargement generally will be set against CGT, rather than rental income, but so will own-purchased materials used in such projects. Am I wrong in believing that own-purchased materials are not deductable against CGT in France?[/quote]

Hi,

      For CGT relief only work done by contractors is deductible in France. In my experience the UK rents , which are not taxed in France ,only used to calculate the rate, are declared on form 2047 secVII  col 4 , gross, then UK tax in col 5, and a sum for expenses in col 6.  The net figure is transferred to form 2042 Line 8 box TI . I have not known the french tax office to routinely ask for accounts, but you should have copies ready , in case.

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