Bringing your pension pot to France.

[Quillan]

I have a small separate pension pot (just under £30k) which to be honest I am losing money on because the charges are more than it makes. I am thinking it would do better to take the pot (after April 6) and put it in a savings account which in my case would, even with the crap interest rates, at least make me some money and this is what I have found out based on being French tax resident.

The first 25% of the pot will be tax free then 25% tax will be charged on the rest at source before you are sent a cheque.

Your next step is to claim back the 25% by using the following form.

Double Taxation: UK/France (SI 2009 Number 226) (Form France-Individual)

Send that back to the address given then wait six to eight weeks and you should get a cheque for the tax back. Strangely you can use your UK tax allowance even though you are tax resident in France and it is applied retrospectively from 1st April to the date the cheque for your pot is raised.

Of course you now have to pay tax in France but as it is from a pension (which it is) you will only have to pay 7.5% (prélèvement forfaitaire libératoire. (Article 163 bis Code général des impôts).).

I can't unfortunately point you to this in writing because I contacted HMRC who told me a 'technician' would call me back which he did and went through it all with me and I took notes double checking all the way. If you are in doubt then contact them and the same should happen for you.

Two points worth a mention. Firstly there is no upper or lower limit, you can take as much or as little as you want and the same rules apply. Secondly I asked as a matter of interest if HMRC notified the French tax authorities that you have taken the money to France and the guys reply was that it was "nothing to do with them (HMRC), thats down to the individual but that you should be aware you would be breaking French law if you didn't declare it".

So I wonder how the two loopholes (saving 17.5% tax and some not even telling them and saving the whole 25%) will stay open before the the French twig whats going on?

[Daft Doctor]

Hi Quillan, I am in a similar position and looked into this a little while ago and again more recently. A couple of things to add to what you've already mentioned (assuming that one decides to come clean and declare the funds to Les Impots):

Firstly, I believe that to qualify for the 7.5% single French income tax charge on the funds it must be a complete and not partial drawdown of the pot. I am not sure how it will be if you have more than one contract with the same provider (as I have), but only wish to cash in one of them.

Secondly, I believe that social charges of in total 7.4% will also be levied on the whole pot in France on the funds declared, with the 4.2% CSG element (56.7% of the social charges paid) allowed against taxable income in the following tax year.

Finally, I thought that in the UK after deduction of the 25% tax free element, the rest is taxed at 20% (i.e. basic rate) and not 25% as you mentioned.

Regarding the reclaiming of the UK tax paid on the pot, if HMRC already knows that you are a non-resident for UK tax purposes, e.g. if you already have an NT tax code on another pension for instance, I understand that a letter to HMRC requesting the refund, with all the necessary details, should also suffice.

I think the biggest problem is whether the pension providers in the UK will be geared up for it in time for 6th April. Last time I rang mine only a few weeks ago, they quite clearly hadn't given their staff any training on the new legislation, as I was told initially that I would have to wait until I was 60 to get the cash and would then only be permitted to buy an annuity with it!

[Quillan]

[quote user="Daft Doctor"]Firstly, I believe that to qualify for the 7.5% single French income tax charge on the funds it must be a complete and not partial drawdown of the pot. I am not sure how it will be if you have more than one contract with the same provider (as I have), but only wish to cash in one of them.[/quote]

I don't know because mine are with two different providers and this is only the lesser of the two.

[quote user="Daft Doctor"]Secondly, I believe that social charges of in total 7.4% will also be levied on the whole pot in France on the funds declared, with the 4.2% CSG element (56.7% of the social charges paid) allowed against taxable income in the following tax year.[/quote]

Not if you have an S1 which I have through Mrs Q.

[quote user="Daft Doctor"]I thought that in the UK after deduction of the 25% tax free element, the rest is taxed at 20% (i.e. basic rate) and not 25% as you mentioned.[/quote]

When the chap said 25% tax my ears did indeed pick up and I asked him again and he confirmed 25% as the tax rate, I didn't even know there was a 25% rate I thought it was 20%.

[quote user="Daft Doctor"]Regarding the reclaiming of the UK tax paid on the pot, if HMRC already knows that you are a non-resident for UK tax purposes, e.g. if you already have an NT tax code on another pension for instance, I understand that a letter to HMRC requesting the refund, with all the necessary details, should also suffice.[/quote]

He said to use the form which is what I will do.

[quote user="Daft Doctor"]I think the biggest problem is whether the pension providers in the UK will be geared up for it in time for 6th April. Last time I rang mine only a few weeks ago, they quite clearly hadn't given their staff any training on the new legislation, as I was told initially that I would have to wait until I was 60 to get the cash and would then only be permitted to buy an annuity with it![/quote]

It is the same with DWP and the new state pension, they also know nothing. Basically the new 'systems' are in place but the people we speak to know nothing until the 6th April when they will be switched over so as not to confuse them. There is also the issue of the budget today and would there be any further changes.

The two problems I see is what fees will the pension companies charge? My £28k is nothing but there must be hundreds of thousands of us in the same situation which adds up to a lot of money which they won't want to lose. Will I be able to complete this before the election as Labour, who will probably be the next government, said they will put a stop to it becase we can't be trusted with our own money.

[AnOther]

[quote user="Quillan"]because we can't be trusted with our own money.[/quote]Unfortunately for a rather large section of society that's all too true and the money will be drawn out and frittered away.

I believe any taxation will be at your marginal rate so where they got 25% from I don't know, maybe whomever you spoke to was confused with the 25% tax free, it wouldn't surprise me.

[Quillan]

[quote user="AnOther"][quote user="Quillan"]because we can't be trusted with our own money.[/quote]Unfortunately for a rather large section of society that's all too true and the money will be drawn out and frittered away.

I believe any taxation will be at your marginal rate so where they got 25% from I don't know, maybe whomever you spoke to was confused with the 25% tax free, it wouldn't surprise me.
[/quote]

These are the statements that annoy me. How is it right that leaving the money in means that it is gradually taken away from you by high charges from the pension companies? £46 a month they are charging me to 'administrate' my pension and as far as I can see apart from printing out an annual statement and sticking a stamp on an envelope they do sweat FA for the money.

There is absolutely no proof at all that those taking their pot will fritter it away because simply it has not happened before.

Even more annoying is Ed Balls voice grinding on in the background who knows a lot about nothing. There IS a man that should be taken out in front of his family and hung from a lamppost.

[Daft Doctor]

Whenever I have rung up the provider and asked the 'how much' question, they have been very consistent in quoting the Transfer Value, adding of course that it varies day to day. This figure presumably by its nature includes all charges relating to moving the pot so should be a reliable indicator of the cash-in value. I was surprised at how much my policies were worth as compared to the annual statements I had been receiving, but the difference is down to terminal bonuses, which are not included in the annual valuation/pension projections.

I should say on the reclaiming of UK tax issue, Mrs DD and I filled in forms France-Individual back in 2012, the purpose of which was to establish our French tax resident status and have this agreed with HMRC. If and when I cash my pot in I will check with HMRC if we need to go through the process again, as it involves providing all details re arrival and length of stay in France, etc, as well as needing to have the forms countersigned by the local French tax office.

Quillan, if your pot is only worth £30k, can't you take it now as a 'trivial commutation', as the limit for this was raised to £30k last year?

[idun]

 Quillan said: 

Not if you have an S1 which I have through Mrs Q.

But you work, and surely pay social charges in France, so how can you piggy back, I have looked into getting S1's etc a lot and was always told that if the person who was piggy backing was working then, no piggybacking for them.

[mint]

 I have a niggling worry about my documents.

My pension people have sent me the forms which request originals of the usual birth cert, passport, OH's birth cert, etc.

I remember reading on here that, even if you sent everything using avis de réception, that's only good for France and, once the docs leave these shores, there is in effect no tracking of them.

They have also said that they will send everything back by "recorded service" but the same would also apply the UK end.  Documents leave the UK and no tracing is possible.

Call me cautious but I don't really like the idea of sending originals of such important documents in case of loss or even worse, in case of theft![:-))]

[Gardengirl]

You've got a point about avis de reception, Mint. I'd not want to send such important documents from France to UK. We've had 6 years of being sent documentation for our buildings' AGM in France to UK; each has been sent avec accusé de reception, but only once has it worked as it should. However, it has always turned up.

[suein56]

[quote user="mint"] I have a niggling worry about my documents.

Call me cautious but I don't really like the idea of sending originals of such important documents in case of loss or even worse, in case of theft![/quote]

IMHO you are right to be concerned. Over our years in France we have been asked to send original documents to the UK to satisfy the demands of this and that and I have always refused; eventually, in each case, an alternative solution has been found.

Stick with it, insist on a different way being found.

Sue

[lindal1000]

Birth certificates can be replaced quite easily. The passport is more of an issue but I've found most places here will accept a photocopy.

[Quillan]

[quote user="idun"] Quillan said: 

Not if you have an S1 which I have through Mrs Q.

But you work, and surely pay social charges in France, so how can you piggy back, I have looked into getting S1's etc a lot and was always told that if the person who was piggy backing was working then, no piggybacking for them.

[/quote]

Well seeing as we both put our S1's into the system in last June and have our new Carte Vitals and were told by CPAM to ignore the demand for the information required to pay our social charges, which we did, and have not be chased I assume not. Perhaps it is different if you are running a B&B.

[mint]

Thank you, Sue and GG, I will ring the company and make the point of the inadvisability of sending our original documents.

I'll offer to have our documents verified.

Imagine if someone stole my identity!  Though, if you knew me, you wouldn't think it's worth stealing[:D]

Lindal, the problem is my pension people are in Bristol, UK.

[andyh4]

Q wrote

Secondly I asked as a matter of interest if HMRC notified the French tax authorities that you have taken the money to France and the guys reply was that it was "nothing to do with them (HMRC), thats down to the individual but that you should be aware you would be breaking French law if you didn't declare it,

Unquote

But when £30k hits your French bank account, the bank will be in contact to ask you the source of the funds and will then (I am informed) pass on that information to the fiscs.

[Quillan]

[quote user="andyh4"]Q wrote Secondly I asked as a matter of interest if HMRC notified the French tax authorities that you have taken the money to France and the guys reply was that it was "nothing to do with them (HMRC), thats down to the individual but that you should be aware you would be breaking French law if you didn't declare it, Unquote But when £30k hits your French bank account, the bank will be in contact to ask you the source of the funds and will then (I am informed) pass on that information to the fiscs.[/quote]

If I am to believe what the HMRC 'technician' told me (how do they come up with these names) I will be paying 7.5% tax in France and not 25% tax in the UK which works for me. Tax avoidance rather than tax evasion. If others wish to not tell the French tax authorities thats up to them but I would rather pay my tax and sleep well at night.

[Quillan]

Just an update as I work through the system

Got the pot minus 40% UK tax! This is because I don't have a UK tax code as I am not resident there. The code they (the pension company) used was 1060L/1.

On the same day the payment was made a letter from HMRC was triggered and sent to me stating that my tax code for this transaction would be 20%! This means that if you have not had a drawdown of 25% previously the first 25% will attract no tax. Next they remove one months worth of standard UK tax allowance which as this for me was during April 2015 is 10,600/12= £833 that amount is subtracted then tax is paid on the remainder at the rates of tax currently used in the UK. Because in my case it with this particular pension pot it was under £31k I should only pay 20% on the remainder and NIOT 40% on the whole lot!

Been in touch with HMRC who tell me that I can claim all the tax back by completing the form I previously mentioned and gave a link to. So what they are saying is they won't send me the 20% overpayment because I will be claiming all the tax back anyway regarless of if the amout taken was right or wrong. Having now printed off the form it is interesting to note that it is two parts, one in English, the other in French. Because the French part with all the information is passed to the French tax authorites and they are required by HMRC to stamp and sign the English verion which you then send back to HMRC to recieve your cheque you are therefore declaring the money to the French tax authorities.

So in a nutshell the HMRC do not talk to the French tax authorities, you do. To enable you to get the tax back from HMRC you ned to complete the form and have it stamped by your local Tresor Public and give them a French language copy. In otherwords you can't hide the money, not that I had or have any intention in doing so.

I have now visited the Imports Office and got confirmation that because this is from a pension pot that it will will be treated as a pension payment and therefore will attract the same rate of tax in France as a pension would which is 7.5% which I will pay next year. All in all I will save around £3k in tax which works for me, it's the next two holidays paid for.

Hope that makes sense.

[Hereford]

Hi Quillan

Sorry to drag this subject up again but: I have just asked for the paperwork to cash two very small pension pots that I have.  Am I right in saying that if I make sure I do not get the money until after 1st January it will be quite a long time before I have to pay the 7½% tax!! Whereas if I get it in this calendar year I will pay the French tax in 2016.

I shall have it paid into my UK bank account but have no intention of not telling the French authorities so it is just a matter of timing.

Thanks in advance.

Mrs H.

[Quillan]

Well if you get it before the 1st Jan 2016 you have to put it on the 2015 tax form which you will pay halfway through 2016. If you manage to get it after 1st Jan 2015 it of course means you be paying it sometime in 2017.

 

You will be paying a lot of tax initially on it, around 40% but you will be claiming the tax back using the form I gave at the begining. The the next payment date for the tax to be returned is on the 2nd November. I don't know when the other dates are because they didn't tell me neither do I know how many there are just when mine is but they are at fixed times every year. They are released in batches.

 

The reason for the high tax rate is because they multiply the amount you get by 52 (weeks in the year because it is paid in one week), take off your tax allowance then tax you. The pension company does this using a special tax code but once they have processed your tax reclaim form you will get a tax coding letter from HMRC with at code of NT (no tax). They also tell you that the pension company will give you the money back which they won't because they sent the money to HMRC within days of sending you the cheque so you have to claim it back from HMRC. I thought I was going to be shoved from pillar to post on that one but when I phoned HMRC ready to give them both barrels they were really nice, put me on hold for four or five minutes then came back and said no problem the cheque for the tax is on the next run. So don't get to wound up when you get your letter about the tax code from the HMRC, just give them a call and explain and have your NI and pension number available.

[AnOther]

I don't profess to understand it but I recently cashed in a very small pension from a job I had in the late 80's (under 4k) and 15% tax was withheld.

To avoid having to wait until after April next year to claim it back I've submitted an R43 form as an 'in year' claim on the advice of HMRC.

Regarding the sending of original documents, the provider in question above requested those but I sent photo copies figuring that if they really didn't like them they'd be back in touch.

My birth certificate is a long one which was two sheets of A4 landscape blatantly copied and selotaped together.

I heard nothing for a few weeks then got a recorded delivery letter thanking me for them and saying that all was in order and that they were returning my 'originals' !

Don't believe everything you're told !

[Quillan]

[quote user="AnOther"]I don't profess to understand it but I recently cashed in a very small pension from a job I had in the late 80's (under 4k) and 15% tax was withheld.

To avoid having to wait until after April next year to claim it back I've submitted an R43 form as an 'in year' claim on the advice of HMRC.

Regarding the sending of original documents, the provider in question above requested those but I sent photo copies figuring that if they really didn't like them they'd be back in touch.

My birth certificate is a long one which was two sheets of A4 landscape blatantly copied and selotaped together.

I heard nothing for a few weeks then got a recorded delivery letter thanking me for them and saying that all was in order and that they were returning my 'originals' !

Don't believe everything you're told !
[/quote]

 

I didn't have to send anything like that. I phoned them (Axa Wealth) up and they sent me an application form to fill in and send back. The cheque arrived about 10 days later much to my amazement.

 

There are two ways of 'cashing in' your pension. The first is to cancel and take the money the second is to take a 100% drawdown. The difference between the two is that the latter is classed as a pension payment because you can chose to either put your money in an equity or take monthly/yearly draw downs the amount of which is up to you. Being classed as a pension means you only pay the 7.5% tax rate in France, the other way it is classed as savings which attracts a higher tax rate, or so I am told. Don't forget that you get the first 25% tax free anyway so what with your tax allowance etc I would think you probably paid around 20% and not 15% because you didn't take the first 25% tax free into account.

 

Anyway if you are marked as not tax resident in the UK then on April 1st they will recalculate your tax on the payment which will make the tax code NT and they will send you a cheque automatically. They know I am not tax resident in the UK because they tried to fine me £300 plus interest years ago for not completing a tax return until I pointed out I had written to them when I left the UK to let them know I was 'emigrating' to France. They wrote back to say they found the letter and that they had decided to cancel the fine out of kindness, no "sorry we got wrong and it was our fault".

[Hereford]

Thank you Quillan.   I shall speak to HMRC once I have completed the forms for the insurance company.   I shall make sure I don't get it before 1st January.

We still do a UK tax return because of property income (commercial but below our combined tax threshold in UK).  As the pension money is taxable in France it will not mess this up but could possibly mean that we could re-claim the tax via the online tax form. As I say I shall phone HMRC in advance.

Thanks again, most helpful.

[Quillan]

You are tax resident in the country in which you 'primarily abode' (live). I don't think you can get away with what you are doing unless neither tax authority is aware of the other. You might find the following link of interest to define where you are tax resident. The only bit it does not cover is UK public service pensions (military, police etc) which have to be taxed in the UK.

 

http://www.kentingtons.com/blog/tax-residency/are-you-a-tax-resident-of-france/

 

It's one of the clearer documents on this issue. If you complete the form I linked to then the French and UK tax authorities will know your situation as to tax residency (because you have to give a copy to each and one of the copies is in French) i,e, your French tax resident.

[Hereford]

Are you replying to my post Quillan, or the next one!!

We are tax resident in France but are forced to do a UK tax return just for our rental income. To make sure there is no misunderstanding by HMRC we always note on our UK return that everything else is taxed in France and on all our pension income we have NT codes. We have done this for the last 12 years and occasionally spoken to HMRC and they are happy.

All other income is taxed in France and, of course, the rental income is also taken into account to get at the tax rate.

[Quillan]

[quote user="Hereford"]Are you replying to my post Quillan, or the next one!!
We are tax resident in France but are forced to do a UK tax return just for our rental income. To make sure there is no misunderstanding by HMRC we always note on our UK return that everything else is taxed in France and on all our pension income we have NT codes. We have done this for the last 12 years and occasionally spoken to HMRC and they are happy.
All other income is taxed in France and, of course, the rental income is also taken into account to get at the tax rate.
[/quote]

 

I was refering to your post. The 'name of the game' is to ensure the right 'people' are happy and not to 'rock the boat' as it were. That works very well in France and it is very important that your French tax 'inspector' interprets the rules in the way it is most benificial for you as I have discovered over the years to my advantage. [;-)] I decided, for instance, not to go ahead with claiming back the CSG because Mrs 'Q' has just started some very expensive treatment and the last thing I want is for the French system to say I do not contribute (having claimed back the money). Whilst this would not be true of course as an S1 holder I don't want them to withhold any payments during the treatment and think it better to wait till afterwards to make the claim. In other works not to 'rock the boat' for the want of making a small payment every year. So as you say they are happy and it works for you then continue, I would.