Furnished UK Rental declaring for French Impots

[handy38]

Hi all,

Last year I declared my UK net rental income after deductions (equal to about 30% of the gross income) on 2042 Box 8TL and again on 2047 in the section 8 "Revenues Exonérés Retenus Pour Le Calcul Du Taux Effectif". My gross rental income is in excess of 15000 euros. I note that I left 8TK on 2042 empty.

After reading various posts, it looks like I would be better off to declare my UK rental income (furnished property) via the 2042 C Pro. It seems this way I can get a 50% deduction.

If I declare via the 2042 C Pro, do I enter the net rental income after the 50% deduction on 2042 Box 8TL and the same value on 2047 Section 8? This is what I'm inclined to do.

But is it correct to not include a gross rental value?

And what about Box 8TK on 2042 for people using the micro-BIC 2042 C Pro for declaring rental income from a furnished property?

Any help would be much appreciated, best regards

[EuroTrash]

Can you use 2042 C Pro if you are not registered as a French business? I am pretty sure that your siret number is one of the boxes you have to fill in at the top of the form.

Logically I don't see you could declare professional income under micro-BIC if you are not operating as a French business.

[handy38]

Thanks for the response.

I have read here and elsewhere (e.g. https://www.impots.gouv.fr/portail/international-particulier/questions/taxation-property-income-0) that it is ok to report rented furnished property on the 2042c Pro as a "non-professional" in boxes 5ND, 50D and 5PG. I don't have a siret, hopefully this wont be a problem. (I also note that the rental income on 2042C Pro is the gross rental income (not the net rental), so it seems that I will be listing a gross income value after all. )

Is it correct that box 8TK on 2042 concerns only foreign income that was taxed outside of France?

[Cathar Tours]

You say in your post that this is income from the UK. Read the first paragraph of the link you gave.

"Income from property in France or the rights concerning this property (undivided interest, bare ownership, life interest, etc.) or property rights (shares or stock in property companies) and ancillary revenue are taxable as property income."

I think you will find this is for property in France only and you might find that using these boxes may be considered fraudulent in as much as they entitle you to certain allowances based on French properties and not non-French properties.

If you take it literally that's how I understand it but I might be wrong. I am sure somebody can help you with the correct "box" if not see your local tax person.

[EuroTrash]

Cathar Tours, that is how I read it also.

[handy38]

Thanks for the information. Obviously the link I provided was written with respect to income from french properties.

There are other links e.g. on UK rental income: https://www.frenchentree.com/france-forum/topic/uk-rental-income-again/, with advice from a user "parsnips" that "If let furnished you declare as micro-BIC- location meublée- on form 2042 Pro.

For now I will stay with the classic 2042 and the 2047 for foreign income forms which I completed after several meetings with my local tax office.

Thanks again

[Cathar Tours]

I don't think you can use a Micro BIC for rental income from outside France. My dad uses a Micro BIC for his B&B in France. Each of the categories under Micro BIC offers a different level of allowance as per specific activities (as per your link) because those boxes are for Micro BIC at different levels. You can't claim these allowances if your property is not in France under the Micro BIC scheme. If you have in the past they may well ask for the money back IF (big IF) they discover you have done this. If this is correct then they can prosecute you for fraud if they can prove you knowingly did so.

When my dad had a tax problem in France he hired a professional translator for only 35 Euros per hour and went to see the tax man who told him which box to complete. Saved him a fortune it turned out and the 70 Euros was very cheap in comparison.

[parsnips]

Hi handy38,

  I just got your message , will get back to you tomorrow.

[BritinBretagne]

I thought that tax on U.K. lettings was taxed in the U.K. then the profit declared in the previous April there was declared in France on the 2047.

[handy38]

I'm not an expert but I am declaring my rental income in both the UK and France each year.

[Mac]

That's what I do. UK self assessment for rental income from our former home and then that amount declared on French tax forms,

[BritinBretagne]

Yes, that’s exactly what you do, you declare the income in the U.K. and France. It’s taxed in the UK and that is recorded on the 2047. You cannot attempt to get any reduction from France.

[Daft Doctor]

Yes, as has been said many times before on this forum, UK property income, be it furnished or otherwise, is taxed in the UK. It is also declared in France however to form a basis (along with any other income taxable in France) for the calculation of any French income tax payable for your 'foyer'. A rebate is then applied to your French tax bill to reflect the proportion of your total income which arises from UK property and has therefore been taxed elsewhere. The French declarations in this respect are made on forms 2047, 2042 and supplementary detail provided via form 2044.

In my case, in France I declare the taxable UK property profit for the calendar year in question, as of course the UK and French tax years are not compatible. Be careful to ensure that any social charges calculated by 'les impôts' on UK property income are fully refunded on your Avis d'Impôt, as both I and others I know have had to point out retrospectively to the tax authorities that social charges are considered a tax under the terms of the dual tax treaty between the UK and France and that a full rebate is due....

[handy38]

Thank you for the informative response Daft Doctor.

It is interesting that some people are declaring taxes in France based on the income generated during the UK tax year as opposed to the french tax year (the calendar year). The tax years are of course very different.

Brittin-Bretagne. There appear to be different ways to declare UK rental income (at least, that is what I thought) depending on whether the income is less than 15,000 euros, furnished or unfurnished. As I understand, there are different ways to account for the expenses incurred. I understand the final rental income figure is not taxed (and social charges are not incurred) but it does however contribute towards increasing the "taux effective".

Daft Doctor- If I have interpreted the Avis D'Iimpot from last year correctly, i did not previously pay social charges (as expected). Pointing this out retrospectively sounds like a nightmare. If social charges were incorrectly applied to UK rental income, where would this be accounted for on the Avis? Second page under Prelevements Sociaux?

Thanks to all for the discussion.

[BritinBretagne]

All your tax allowances have already been taken account in the U.K., you just declare the profit in the correct box on Form 2047. You cannot seek extra allowances in France. At the end of the day it probably doesn’t matter if the profit that you are declaring in France is the 12 months from April to March or from January to December but the former is an actual net figure for a full tax year. Whichever you do keep records explaining you choice.

[handy38]

Brittin-Bretagne, you are again talking about allowances when I am talking about deductions (e.g. expenses and costs incurred during the rental of the property). Two different things. Also, when you talk about declaring profit, are you talking about the profit or the net income after allowable deductions? Profit is very different to a declarable net income.

Even if we are only taxed in the UK on the rental income, I am suprised it is considered normal to declare values in the UK based on the UK tax year and and to declare values in France which are based on the UK but not French tax year. It doesnt seem logical but if it is commonly accepted, it is a convenient approach.

[BritinBretagne]

Your U.K. rental income has had all the possible allowances and expenses taken into account before you declare it in France. Call it the net income or profit, I was just quoting the term used in a guide, it makes no difference. You cannot, indeed must not, seek to get further reductions by the misrepresentation of that income on a French tax return. The French tax office understands the U.K. system uses different dates and makes allowances. I always use my actual income, January to December but I know that the (easier) figure from my P60 would also be accepted. In your situation the April figure provide by HMRC after your expenses and allowances have been taken into account is probably more straightforward than you using the calendar year figure and doing the calculations for allowances and expenses especially as those allowances might be different in the two U.K. tax years. Whatever terminology you use and whichever year you chose it changes nothing, the amount you declare on the 2047 in France is the U.K. income after expenses and allowances have been taken into account and UK taxes paid. The figure entered onto the 2047 is copied onto the 2042 as instructed to show foreign income in which tax has already been paid. As such it is a credit on your French tax bill but it is not eligible for any further reductions that might be available for those people who let property in France. You cannot have your cake and eat it, well not legally anyway.

[parsnips]

Hi handy 38,

I sent you a PM yesterday but it doesn't seem to have reached you;

Here is a copy;   

"Hi handy,

   I note your latest message , but I

see from what you wrote below that you did not  declare correctly last

year.  (bear in mind that however you declare UK rents they are totally exempt from french taxes and charges -article 6 of the DTT 2008) . If I were you I would  just put the  net rents in 4BA and 4BL and 8TK on 2042 and sections 4 and 6 on 2047 .  Box 8TK is the most important of all.

  Section 8 on 2047 "revenus

exonerés pris en compte piour le taux effectif " does not concern UK

tax-payers , and should not be used. ( This was changed in the 2008 treaty)

 

Hope this helps,"

I feel you are overthinking this subject (easy to do in the morass of french taxes),   Just declare the rent net of UK- allowed deductions.  If the figures are april -april and its easier to use them , do so.   If the tax office want any further info , they will ask for it (unlikely).  They know that whatever you declare, it is exempted from all french taxes and they are unlikely to spend time chasing income they can't tax.    Having said that ; you will now probably see a load of posts explaining in excruciating detail  how the system actually means you are taxed twice on the same income - you are not.

 

[Cathar Tours]

Re your "allowances" point. As far as I can see in the UK (if you lived there) you might consider setting up a Ltd company or operate as a sole trader via an accountant then you can deduct all repairs etc. from your income via your accounts and pay tax on what's left. If you live in France and your rental properties were in France you could do something similar.

For those that are non professional i.e. don't set up a company you get allowances. For example my father gets a 71% allowance against his income from his B&B. All he has to enter on the French tax form is the total invoiced income every year they then take 71% off and he pays tax on what is left after his personal tax allowance is also taken out. That is what the boxes are for on the link you gave earlier on. Each box gives a lower allowance depending on the activity you are taking part in or you take part in multiple activities.

That has changed for "new" people now. If you started a B&B today you would have to register properly like a company but those that were open before the law changed could stay in the old system which was very beneficial tax wise.

You can't do this because your properties are in the UK and you MUST pay tax on them there as everyone has pointed out. After all expenses are taken out and your tax is paid you get your "profit" which you put in the right box on the French tax form as Parsnips has shown you. You won't pay anymore tax and you won't pay any social contributions if what others say is correct.

You may think this is pointless because why put a figure on the tax form which to all intents and purposes is ignored. The thing is there are other things that your total income after tax effect like if you had a child at university for example none of which would be applicable to you but that's how it works.

As said your over thinking it which over complicates it so just follow Parsnips post or if your still not sure get professional help. At least if they get it wrong you have some comeback.

[handy38]

Hi parsnips, yes, of course I received the email and plan to correct my form. Much appreciated. I declared as I did (as discussed in PM), not based on what I read on the internet, but based on the local tax office and two lengthy meetings with different tax advisors. I was instructed to declare as I did using 2042 and 2047.

This discussion was looking for the best but correct and legal way to report UK rental income from a furnished property. I am not interested whatsoever in "having my cake and eating it" or dodging tax, and if this is insinuated in any messages on this forum, then its a bit ridiculous. The origin of these messages came from reading on the internet that the MicroBIC form could also be used to declare for UK rental properties but it now seems that this is not correct. That is good to know.

Thanks for the constructive comments.

[handy38]

CatharTours and Parsnips, thanks for the advice

I understand that the UK rental income (after allowable deductions) is taxed in the UK and not in France. I also understand that the value contributes to the final taux effectif, which is used to calculate the tax due in France? If this is correct, then depending on the UK rental income, which can be quite substantial for some, this could change which tax bracket (taux d'imposition) your taxable french income falls into? Perhaps I am wrong here.

Thanks

[parsnips]

Hi,

    As I have pointed out, the system used now is not the "taux effectif" , but the somewhat similar "credit "system which replaced it in the "new" tax treaty of 2008.   Although the rents themselves are not taxed , the inclusion in the overall tax rate calculation can result in a higher rate on the french taxable income.

     The income tax calculation is as follows ;  (say 20000€ net rents , and 25000other (french taxable )- income for a couple.)   Total income 45000 x 0.14 - 2746 = notional tax 3554€* ...................3554 x 20000 / 45000 =1579 credit .......final tax 3554 - 1579 =1975€ , after applying the "decote" mechanism , this reduces to 458€ before any deductions special to you , like donations to charity.  

 The social charges calculation is simpler , From whatever the overall CSG comes to on the total income a credit equal to 20000 x 17.5 is deducted .   If there is no other income on which GSG is legitimately due (bank interest dividends etc) the social charges should be 0.

If only the 25000 was taxed the bill would be 754 - decote  (1939 -(754 x3/4 ) =0 tax*

So there is significant effect on the income tax depending on how much of your income consists of rents but it is quite similar to, but slightly less favourable than the result of the previous "taux effectif" system.

 I'm

afraid you'll have to take my calculations on trust as a full

explanation especially of the "decote" would take a lot of time and

space.

 

* this is using a quick calculation from the "Le Particulier" magazine.

[Daft Doctor]

I simply calculate the taxable UK property profit (i.e. rental income minus allowable expenses) before deduction of personal allowances, then convert to euros and enter on form 2047 & 2044. I use cash book software for recording, so crunching the numbers for any calendar year is not difficult for me. I use the Banque de France exchange rate on 31st December for the £/euro rate to apply to the profit figure, though others may use a different method. Thing is I am consistent in how I do the calculations and can demonstrate how I came to the figures if ever asked to do so......

[Debra]

I declare the gross and list expenses in both countries (reel in France) but when I declared as micro fonciere in France I declared the gross amount as under that system you don't deduct expenses but get an allowance of 30% for them.

So this year, under reel, I've filled out the gross rent and expenses on the 2044 and the net is then reported to 4BA, 4BL and 8TK. My 'expenses' don't include UK tax.

Last year, under micro fonciere, I put my gross rental receipts in 4BE, 4BK and 8TK. I used that system as my expenses were at or under 30% anyway but this year they were much more than that and they will be next year too so I declared reel.

People in this thread seem to be saying they declare the net amount in France, even deducting UK tax, which isn't correct because you'd then get another 30% allowance against that amount in France, so by declaring net of both UK tax and expenses in France, you're underdeclaring by the amount of the UK tax and expenses.

Your gross has always got to be declared in France one way or the other. Either only that and you get the 30% expenses allowance (micro fonciere) or that and also declare expenses to get the actual amount of expenses allowed (fonciere/reel).

The amount of UK taxes paid aren't mentioned. They are irrelevant as the fact that the income is subject to tax in the UK is the reason the French tax is credited out. The taxes mentioned on the 2044 refer to property taxes, not income tax.

[handy38]

Daft Doctor-

In your message you mentioned that you calculate the taxable UK property profit (rental income minus allowable expenses) *before* deduction of personal allowances. Like the basic personal allowance for UK tax residents of approx. 11,000 GBP? (apologies if I have misunderstood).

Deducting the allowance of approx. 11,000 GBP would make a HUGE difference to the reported net income value. This would mean many people would be reporting values of zero for net rental income on the Fr tax return.