CGT Allowances

[Nick Trollope]

I had an interesting (and long) conversation with my Notaire yesterday. The jist of it was that the "new" law on CGT allowances - only invoices from registered Artisans were permitted to be offset against CGT liability - has been reinvented; Now only invoices for NEW building work can be used. She used the example of replacing single glazing with double. The building had windows before, so the new ones did not qualify. Likewise a rewire, where the property had electricity.

And I've been telling my clients that a good reason to use a registered Artisan is the CGT benefits....

Anyone else know better?

[NormanH]

Did she say since when this change has come about?

The site of the Notaires of Paris is still quoting theold (new!) version

du montant réel des

éventuels travaux de construction, reconstruction, agrandissement,

rénovation ou amélioration réalisés par des

 entreprises

In these cases where a professionam quotes somthing a bit bizarre  I find it can help to politely ask for the reference no of the 'texte' so you can see it for yourself

[timc17]

If this is correct it will have a major impact on the construction industry (for renovations etc) and make non-residents and second homers think twice about purchasing old houses requiring work when they know they'll have to pay CGT on any value they add to their property.

[Nick Trollope]

[quote user="timc17"]

If this is correct it will have a major impact on the construction industry (for renovations etc) and make non-residents and second homers think twice about purchasing old houses requiring work when they know they'll have to pay CGT on any value they add to their property.

[/quote]

Exactly the point my Notaire made. She says she has seen a significant decrease in the sale of properties for renovation & sale.

The law is (I gather) a reinterperatation of the law that came into effect in 2006. It would appear that the law has always said that new work only is covered, our local Impots are redefining "new".

[timc17]

Where does this leave British holiday home owners who are in the middle of major/minor renovations?  To give you an example - Mr G is currently spending around 50k (euros) with my macon colleague re-wiring, re-plumbing, re-roofing, replacing windows and replacing the bathroom and kitchen. This expenditure will double the value of the property but as a non-resident he will be forced to pay CGT should he ever sell the house. He will not be best pleased as he was assured that as long as he kept bona-fide receipts from registered artisans these costs could offset against any increased value and would lower the possible CGT bill.

I think a trip to our local Impots office is required a.s.a.p.

[woolybananasbrother]

Perhaps the French govt has ordered a clamp down on subsidizing second homes?

[ams]

The legislation has not changed. essentially the majority of fiscal authorities make the difference between capital expenditure for tax purposes and repairs and renewals. Thus if one has a very old bathroom and you change it and put in a state of the art bathroom costing throsands of €, even with gold taps etc, it is revenue expenditure. On the other hand if you add a small WC to the house that would be capital expenditure.

 

From a taxation point of view, the majority prefer to be able to write off costs against income taxation, thus try to get the expenditure classified as revenue costs, for those that the house represents a principal residence no problem exists. For those were the house is a secondery house or holiday home a genuine problem exists in terms of capital gains tax exposure. generally speaking with a little bit of planning most of the major costs of renovating an old house can be allowed as a cost for CGT purposes.

 

ams

[timc17]

[quote user="ams"]

The legislation has not changed. essentially the majority of fiscal authorities make the difference between capital expenditure for tax purposes and repairs and renewals. Thus if one has a very old bathroom and you change it and put in a state of the art bathroom costing throsands of €, even with gold taps etc, it is revenue expenditure. On the other hand if you add a small WC to the house that would be capital expenditure.

 

From a taxation point of view, the majority prefer to be able to write off costs against income taxation, thus try to get the expenditure classified as revenue costs, for those that the house represents a principal residence no problem exists. For those were the house is a secondery house or holiday home a genuine problem exists in terms of capital gains tax exposure. generally speaking with a little bit of planning most of the major costs of renovating an old house can be allowed as a cost for CGT purposes.

 

ams

 

[/quote]

My understanding of the original post was that renovation costs such as re-wiring cannot now be offset against CGT. Are you saying this is not the case?

 

[ams]

No, it was never allowed as it was a replacement and therefore not capital expenditure. However if the building had no wiring then putting in wire would be capital expenditure and therefore be allowed for CGT purposes.

 

In the past such costs were allowed to "slip through" the system, now perhaps it has changed, the legal situation has not changed.

 

ams

[Sunday Driver]

Here is the relevent section from the code general des impots:

Art 150 VB (modified by Loi 2007-211 of 19 February 2007 art 5)

II. - Le prix d'acquisition est, sur justificatifs, majoré :

1° De toutes les charges et indemnités mentionnées au deuxième alinéa du I de l'article 683 ;

2° Des frais afférents à l'acquisition à titre gratuit définis par décret ;

3° Des frais afférents à l'acquisition à titre onéreux définis par décret, que le cédant peut fixer forfaitairement à 7,5 % du prix d'acquisition dans le cas des immeubles à l'exception de ceux détenus directement ou indirectement par un fonds de placement immobilier mentionné à l'article 239 nonies ;

4° Des dépenses de construction, de reconstruction, d'agrandissement ou d'amélioration, supportées par le vendeur et réalisées par une entreprise depuis l'achèvement de l'immeuble ou son acquisition si elle est postérieure, lorsqu'elles n'ont pas été déjà prises en compte pour la détermination de l'impôt sur le revenu et qu'elles ne présentent pas le caractère de dépenses locatives. Lorsque le contribuable, qui cède un immeuble bâti plus de cinq ans après son acquisition, n'est pas en état d'apporter la justification de ces dépenses, une majoration égale à 15 % du prix d'acquisition est pratiquée. Cette majoration n'est pas applicable aux cessions d'immeubles détenus directement ou indirectement par un fonds de placement immobilier mentionné à l'article 239 nonies ;

 

Costs of construction, reconstruction, enlargement or improvement, born by the vendor and carried out by a company since the completion of the building or its acquisition if it is posterior, when they have not already been taken into account for the determination of income tax and that they do not represent rental expenditure......

 

 

 

 

[NormanH]

[quote user="ams"]

No, it was never allowed as it was a replacement and therefore not capital expenditure. However if the building had no wiring then putting in wire would be capital expenditure and therefore be allowed for CGT purposes.

 

In the past such costs were allowed to "slip through" the system, now perhaps it has changed, the legal situation has not changed.

 

ams

[/quote]

Nobody has yet found a 'texte' other than the one I quoted.

"Le prix des travaux de construction, reconstruction, agrandissement, rénovation ou amélioration"

In that case it all depends on the interpretation put on 'reconstruction'...

For example a wall that has to be re-built in my terms is reconstruction, even though it could be called a replacement.

You could argue the same for a roof...which is a rénovation.

Where did you fish out this distinction ams?

[Sunday Driver]

[quote user="NormanH"]

Nobody has yet found a 'texte' other than the one I quoted.
"Le prix des travaux de construction, reconstruction, agrandissement, rénovation ou amélioration"

[/quote]

Perhaps you missed the post containing the actual text of the tax code....

I think you'll find that the word 'rénovation' was introduced by your unofficial website - there's no actual mention of it in the legal code.

 

 

 

 

[NormanH]

[quote user="Sunday Driver"]

[quote user="NormanH"]

Nobody has yet found a 'texte' other than the one I quoted.

"Le prix des travaux de construction, reconstruction, agrandissement, rénovation ou amélioration"

[/quote]

Perhaps you missed the post containing the actual text of the tax code....

I think you'll find that the word 'rénovation' was introduced by your unofficial website - there's no actual mention of it in the legal code.

We were posting at the same time, so I didn't see your post, which provides for the first time exactly what I asked for before..the official texte .Thank you

On the other hand it doesn't change the gist of what I said before.

Even if you take out the word 'renovation ' (which is still there in the site of the Notaires of Paris!) what I posted was

"In that case it all depends on the interpretation put on 'reconstruction'...

For example a wall that has to be re-built in my terms is reconstruction, even though it could be called a replacement."

It still seems to me that the crux is in the interpretation of the word reconstruction, and I don't see any mention of "capital expenditure"   and " revenue expenditure." in the texte.

What about a roof that has caved in?  The building has one, but it needs to be rebuilt.  Isn't that reconstruction?

 

 

 

 

[/quote]

[ams]

32 years as a FCA, 25 years as a FITI, 32 years in professional practice, but hey what would I know ?

 

ams

[NormanH]

[quote user="ams"]

32 years as a FCA, 25 years as a FITI, 32 years in professional practice, but hey what would I know ?

 

ams

[/quote]

I do apologise!

I didn't realise you had been living and practising in France for so long.

I assumed you were one of those Brits who come over and assume that things are exactly the same as in the UK, including ways of warking and the interpretation of Law.

Obviously not.

As this has very important consequences for some of us, perhaps you can point us to the French sources of your information: after all you are the expert, and we bow to your knowledge, but would like to see what to quote to substantiate it if we have to.

[ams]

Perhaps "us" would go and visit an EC and pay the fee, but then again IASB publications are your daily reading.

No need to respond.

ams

[NormanH]

I have absolutely no doubt of your professional knowledge and experience in this field :-)

 but  is about something more important than your ego.

 

SD has found us the 'texte' What I am asking for is references that show how "reconstruction" as in

Des dépenses de construction, de reconstruction, d'agrandissement ou

d'amélioration, supportées par le vendeur et réalisées par une

entreprise

is being interpreted in France.

The OP says that his Notaire has indicated a change of interpretation.

Is this happening all over, or is it another example of different offices putting different interpretations on things?

Are there any written guidelines, and where can they be found?

Where does this leave the 15% of the purchase price that can be deducted if you have no 'justicatifs'

I would have thought that is this is not counted as capital expenditure

in your terms it wouldn't be deductible either, but has anybody any

evidence that this is happening?

Lorsque le contribuable......  n'est pas en état d'apporter la justification de ces dépenses, une majoration égale à 15 % du prix d'acquisition est pratiquée

Post edited by the moderators. Users must not post messages which:

• Are insulting, abusive,
  racist, sexist, or derogatory in any way to others, whether they are
  individuals or companies, users of the Forum or not.

• Contain explicit language or vulgarities (whether written in French, English or any other language)