Pension fund "cashed in"

[Hereford]

I took in January this year the whole of a very (very) small pension pot.  Following what other people on this forum had done I sent off a form R43 to Leicester to get the tax back.

Having heard nothing I telephoned them today and was told that a letter is winging it's way here (apparently sent two weeks ago so coming via Scandinavia obviously).

The letter, I am told, says that as I am required still to complete a UK tax return - even though we are tax resident in France - I should claim my pension tax back on that form not a separate R43.

Others may well be in the same boat. It means that if you take a pension pot after 5th April this year and you are required to fill in a UK tax form you will have to wait until 2017 to get a refund of tax.

I always do my UK return online on 7th or 8th April so only have a month to wait now anyway and at least I know the money will then be repaid within a week.

[Cathar Tours]

What you need it one of these.

 

https://www.gov.uk/government/publications/double-taxation-united-kingdomfrance-si-2009-number-226-form-france-individual

 

You claim the tax back from the UK and then pay tax in France. You will note when you print it that there are actually two forms, one in English, the other in French. Both are identical except for language so complete the UK one first then copy to the French one. Take both copies to your French tax office for confirmation you are tax resident in France. They will stamp and sign the English version which you send back to HMRC (it tells you where on the form) and they will keep the French version if they know what they are doing.

 

You put the amount in C.2 and the description should be "Pension Drawdown". I am told this is important because it will be treated as a pension and attract French tax at a lower rate. If you say you cashed it in then it is no longer considered a pension and attracts higher tax rate (according to Impots tax calculator).

 

Your other issue is CSG. It is a shame you waited till January 2016 because I read elsewhere on the forum that CSG no longer exists from that date and has been replaced with a different tax which you can't claim back. This new tax rate strangely enough the post said was the same as CSG. If you had done it before then you would have been able to claim the old CSG back.

 

So what you have to work out is how much tax in total you will be paying in France on this money (probably around 22.5% but don't quote me on that, it may be more) and what you will be paying in the UK as to where you will be better off.

[AnOther]

I did exactly the same last year but have no affairs in UK which require me to submit a UK tax return.

The pension provider deducted tax as they were duty bound to do tax but I phoned HMRC about it and they sent me form R43 and told me to annotate it

with  'in year claim'.

I got my tax back a few weeks later.

I seriously doubt someone who has been here as long as the OP has needs a France Individual, I've never ever filled one in !

[Hereford]

I am not sure I understand why you think we need a different form. We have lived in France for 14 years and did the double tax treaty form back then.  Because of property income in the UK I have to do a self-assessment form there as it is taxed in the UK. All  income is then on a French tax return (double tax treaty sorts out tax on property income). The pension cashed in will go on our UK form so as to get the tax back as instructed by HMRC today and will be taxed, and probably CSG'd, in France.

As it happens even with CSG we will pay less tax on it here in France.

Thanks for your input though, it could be what other forum members need.

Mrs H

[Cathar Tours]

I rent out a property in the UK and I don't pay tax there, I haven't filled in a UK tax return for many years. I declare the income in France and am totally French tax resident. I was surprised when I changed over that it saved me money being taxed in France and I would rather the country I live in have my money than one I don't. It was HMRC who told me to use the form I gave a link to but that may be because I pay all my tax in France. The only issue I had is that not having a UK bank account I had to be paid by cheque which took a little longer.

 

The UK taxed me at 40% on the basis that tax is calculated weekly then annually. So the week in which I was paid was multiplied by 52 for tax purposes which accounts for why I was taxed initially at 40%. If I had done nothing at the end of the UK tax year they would subtract a single persons tax allowance from the amount I received then the amount would be taxed at the appropriate amount i.e. 20% as an annual income and I would get a refund. The benefit of the way I did it is that classed as a pension payment and after CSG was refunded I only paid 7.5% tax. plus the couple of percent of CSG you can't claim back. I have no idea what a R43 form is because I have never used one.

[cajal]

"I have no idea what a R43 form is because I have never used one."

R43

regards

cajal

[AnOther]

If you haven't claimed back tax in similar circumstances then no reason you would.

[Daft Doctor]

Hi Cathar Tours, all property income is taxed in the country in which it arises, so UK property income is in fact taxable in the UK. As a French tax resident, the UK rental income must be declared in France as part of worldwide income, which then determines the tax bands applicable to any income which is taxable in France. A proportional rebate is then given on the total tax bill by the French tax authorities to avoid dual taxation on the UK rental element.

It could be that after deduction of the UK tax allowance there is little or no liability to UK tax, but this does not matter, it is only that it is taxable in the UK that counts under the dual tax treaty. In fact, overall it is probably cheaper having the UK rental income taxed in the UK and the rest of income in France, as it allows use of both UK and French personal allowances. That said however, it is not a matter of choice, the rules are the rules, and I'm sure others will verify that the position is as I've said above.

[Hereford]

Exactly right Daft Doctor.  We were told explicitly that we should continue to file a S. A. form in the Uk. In any case it enabled us to get back (quickly) tax deducted on some savings that are still in the Uk. One can use an R43 for that if not filing a tax form but it is very slow.

Filing online gets the tax back in days to a UK bank account.

[AnOther]

[quote user="Hereford"]One can use an R43 for that if not filing a tax form but it is very slow.

Filing online gets the tax back in days to a UK bank account.

[/quote]Surely filing in UK means you have to wait at least until the end of the tax year ?

Like I said my R43 got my tax back within a few weeks of paying it (6 or so without digging into my records) which is not a bad result as these things go [:)]

[Hereford]

AnOther: you do not, apparently, have to wait until the end of the tax year for a one-off like the pension pot cash in. A former member of this forum found this out which is why I sent an R43 off in January - hoping I would not have to wait until April!

Normally a paper R43 (can't do it online) takes several weeks to process as you found.

Doing a Self-assessment form online means you get the refund automatically in about 4 to 5 days. If you have not received it by then something has gone wrong because the file is untouched by human hands.  The only year it was a longer wait I telephoned and was told I had been "chosen" as a random check!  I think actually that we were one of the first to do it that year (on 6th April) and they were checking that the software worked...

[Daft Doctor]

I too have a pension pot in the UK, which I shall be withdrawing in full next year, and I too have to file a UK self-assessment return as I have rental income in the UK. I was figuring that between January 1st and April 5th would be the best time for me to make the withdrawal, since as Hereford has explained, a refund of any UK tax deducted at source on the pot can be claimed thought prompt submission of the UK return, i.e. asap after 6th April. On the other hand, as far as French tax is concerned, the pot will be withdrawn in 2017, so the French tax & social charges won't be paid until September 2018, so good for cash flow!