Opting out of 'Double taxation treaty' - has anybody done it?

[Oboulez]

My government service pension is taxed at source, however the arrival of this years tax forms has spurred me into thinking again about something which I have been contemplating for a while. I pay quite a lot every month UK tax - and get not a jot in return, having absolutely no interests or assets - indeed no intention ever to return to the UK. I applied and have been sent forms from the UK tax authorites which I could send to the French authorities for me to opt out of the agreement, and pay my tax here. Looking at the tax bands, I believe that I would pay much less tax - plus, I would rather pay tax where I actually live and derive benefits from. Has anybody else opted out, and if so, what effects did it have? Thanks

[YCCMB]

You will pay less tax, but have you taken into account any liability for additional social charges?

[Oboulez]

This is the sort of thing that I am wondering about Betty. At the end of the day, even if ended up paying the same here, I would rather pay my tax here. Do you know how the social charges work?

[EuroTrash]

Is this a new thing? I always thought you couldn't choose where income is taxed. The tax treaty specifies what type of income is taxed where, and I thought that UK govt pensions were always taxed in the UK.

The DTA is a treaty agreed between governments to decide how they divvi up the taxes between them. Seems odd that an individual can opt out of bits of it.

[Oboulez]

I posed the question to the HMRC Liverpool office (possibility of paying tax in France), and they sent me forms in English & French. The English goes back to Liverpool, & the French to the local tax office. The form does not have a number printed on it, however it is headed "Form France-Individual - UK/France double taxation convention (SI 2009 Number 226)".

[nomoss]

I believe that form applies to income arising in the UK from bank interest, rental property, etc., but not that from government pensions.

Edit:

See http://www.hmrc.gov.uk/cnr/france-individual.pdf  France-Individual Notes, Section C2 :

UK Government and local authority pensions

If you receive a pension from the UK that is paid for service to the UK Government or a local authority, the current and previous UK/France Double Taxation Conventions (DTCs) include rules that decide how such pensions are to be taxed.

 

And see: http://www.hmrc.gov.uk/taxtreaties/in-force/france.pdf   Article 19.2 :

2. Pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a local authority thereof, or, in the case of France, a statutory body, to an individual in respect of services rendered to that State, authority or statutory body shall be taxable only in that State. However, such pension shall be taxable only in the other Contracting State if the individual is a resident and a national of that State without being also a national of the first-mentioned State.

 

[EuroTrash]

The France Individual form doesn't mean you are opting out of the treaty, it is to ensure that the treaty is applied correctly by both countries and you're not taxed twice.

In some cases you will stop paying tax in the UK and pay it in France instead, eg for bank savings interest. But there are some types of income that are always taxed in the UK, and I believe that government pensions are in this category.

[idun]

I looked at that form and it is not for government pensions, it is quite clear, state pensions and pensions, but not government pensions. The exact same applies to a french person with a french government pension moving to the UK, or anywhere else, it is taxable in France. There is no way out of it.

Incidentally until our french state pension started (uniquely taxed in the UK) our income from France was eligible for french non residents tax, before being taxed in the UK too, at least the french tax was taken into account by the HMRC.

RE the social charges in France, well they can be hefty, I frankly would not even check on them, because you cannot even do this.

When we were still paying full cotisations in France as non residents that included paying 'chomage', even though we had no eligibility at all to get unemployment benefit in France, I called the URSSAF and was told that it was 'solidarité'[:D].  Would not have irritated so much if the person telling me this did not pay 'chomage' as I do believe that fonctionnaires do not.

[Oboulez]

On the notes section, the form states "Form France-Individual enables you as a resident of France to apply under the UK/France double taxation convention for examption from UK income tax on a UK state pension or UK incapacity benefit, and UK sourced pensions,....... The form provides for a claim of repayment of UK tax in case where payments of the income have already been made with UK tax deducted. I asked HMRC the specific question, and it appears that they have sent the form for me to enable me to do that. I was wondering whether anybody else had actually done it & their subsequent experience. Thanks for the posts so far.

[Oboulez]

On the notes section, the form states "Form France-Individual enables you as a resident of France to apply under the UK/France double taxation convention for examption from UK income tax on a UK state pension or UK incapacity benefit, and UK sourced pensions,....... The form provides for a claim of repayment of UK tax in case where payments of the income have already been made with UK tax deducted. I asked HMRC the specific question, and this is what they sent. Thanks for the posts so far.

[EuroTrash]

http://www.hmrc.gov.uk/cnr/uk_gov_pensions.htm

(sorry you will have to copy and paste the lin)

[Rabbie]

[quote user="Louise Gary"]

On the notes section, the form  states "Form France-Individual enables you as a resident of France to apply under the UK/France double taxation convention for examption from UK income tax on a UK state pension or UK incapacity benefit, and UK sourced pensions,....... The form provides for a claim of repayment of UK tax in case where payments of the income have already been made with UK tax deducted". I asked HMRC the specific question, and this is what they sent. Thanks for the posts so far.[/quote]

As I understand it, there is a difference between how UK Government pensions are treated by HMRC as opposed to UK State pensions, ordinary employment pensions etc. It seems that UK government pensions are always taxed in the UK while the others should be taxed in your country of residence.

[Daft Doctor]

Yes, I went through the France Individual forms thing last year without difficulty. I'm afraid Louise Gary the other posters are correct. The dual taxation treaty applies to all and sundry, end of story. France Individual is as has been said designed to establish your french tax residency and avoid you being subject to dual taxation. Certain income, such as UK property income and UK government pensions are always taxed in the UK, there is no choice in the matter.

In my case I have an NHS pension which is a non-government pension (don't be confused between a government pension and a public sector pension, they are not the same thing) and it is taxed in France. I have UK property income and that is taxed in the UK, but it is declared in France and goes to establish our marginal tax rates in France. There is no choice over this arrangement, France Individual signed or not.

[YCCMB]

There's a certain logic to this,whether you're French or British. Salaries paid to the armed services, police etc., are funded by the UK (or French) taxpayer. Many taxpayers might be a bit miffed if the people they'd funded throughout their careers then just decided to move abroad, taking their accrued pension pot and letting another country's government have the benefit of any tax liability. That's money that was supplied by UK taxpayers, and they'd probably think that if anyone was going to get anything back out of it, then it should be the people who contributed to it in the first place. For example.

[idun]

The form is quite clear about your not being able to avoid paying tax in the UK. HOWEVER, it also says:

. But if, exceptionally, you are

a national (and

resident) of France without also being a UK national

, then use form France-Individual to claim exemption from UK tax

on your pension

Which may be way out, become french, renounce your british nationality officially and voila, it could well go through. You did, after all say that you had no intention ever to return to the UK.

Incidentally, the same would apply to us, IF we had had french government pensions, now we are returned to the UK, we would not have to pay french tax on this pension, as we would be british nationals living in Britain and only pay british tax, because that is how it works.

[NormanH]

I see no difference between salaries directly funded from taxes ( the armed forces for example) and those funded by businesses which get their income from UK consumers.( A retail business as another example).  Both incomes are sourced from the same people.

Government pensions are only partly funded by the taxpayer since the recipient has paid considerable contributions.

Would you also say that a shopkeeper who has grown rich from his local client base should also be taxed in the UK if he moves abroad so ' if anyone was going to get anything back out of it, then it should be the people who contributed to it in the first place'

[EuroTrash]

"I see no difference between salaries directly funded from taxes ( the armed forces for example) and those funded by businesses which get their income from UK consumers.( A retail business as another example). Both incomes are sourced from the same people."

I see a very big difference.

When I buy something from a local shopkeeper I can see straight away what I got back, and it's something I wanted or I wouldn't have handed my money over - I got a tin of baked beans or a sack of coal or whatever.

When I pay taxes all I can see is a hole in my bank balance.

[YCCMB]

[quote user="NormanH"]

1.Government pensions are only partly funded by the taxpayer since the recipient has paid considerable contributions.

2.Would you also say that a shopkeeper who has grown rich from his local client base should also be taxed in the UK if he moves abroad so ' if anyone was going to get anything back out of it, then it should be the people who contributed to it in the first place'

[/quote]

I'm not expressing a personal opinion, Norman, so what I would or wouldn't say is irrelevant. However, to address your points above:

1. The contributions paid by the recipient are paid from a salary which, in the first instance, is funded by the taxpayer. So the taxpayers' money is being saved by the recipient towards a pension.

2. A shopkeeper who has grown rich from a local client base has done so on the basis of his (or her) own merits. If, for example, I disapprove of the ethics of a local business, or I don't like their products, I can choose to shop elsewhere. I cannot, however, choose where the Government spends my taxes.

It's a bit like your recurring argument about having no choice as to where to pay your tax. That tax is levied on a pension derived from a salary funded by people who had no choice as to whether they funded it or not.

[AnOther]

I agree with Betty, like it or not the UK taxpayer both paid your salary and contributed a not insignificant sum towards your pension, and now, not unreasonably IMO, they want a bit of that back now you are drawing it, by what logic would or should they give that to France ?

Feel free to rip this to bits but it seems to me that the tax you have to pay in UK is only of significance if you are living on a small income in France, small enough to keep you out of paying tax. If your income does elevate you into French tax then what you have paid in UK will be taken into consideration when working out your overall liability meaning in effect that it doesn't matter where it's been taxed in UK because your final tax bill will be the same.

[Gardian]

How annoying - just did a lengthy reply and everything froze, so I lost the lot!  Start again.

Daft Doctor is absolutely right - this something that Norman put me on to a while back.

The France Individual Form allows for your UK State Pension not to be added to any UK-taxable Occupational Pension (as you are well aware, typically former 'government' employees).  Thus if you are currently in receipt of the former at a rate of (say) £6k p.a. and the latter at a rate of (say) 14k p.a., then you would have a taxable income of £9,500 (after deduction of the £10,500 personal allowance), giving a liability of £1900 at a rate of 20%.

After this form is processed, the numbers would change to £3,500 taxable income @ 20% = £700.  You'd be entitled to a refund from HMRC for any previous 'overtaxed' years.  Obviously, I've rounded up numbers roughly here.

Here's the rub though. You seem to be suggesting that you are not currently imposable in France (forgive me if I've got that wrong). If that is the case, you are obligated to correct that - the Impots wouldn't sign off the form until all previous years since your arrival in France had been dealt with. They'd help with that though and they're quite amenable (well ........... ish). They sign off the form and either you or they send it off to HMRC at Cardiff, who are quite quick at turning them round. Be aware that you might have some previous years liability - depends on the numbers. 

This all works - Mrs G did it a few years ago and got a nice refund from HMRC.

[NormanH]

hAs a matter of fact I am in a special case which means that the Taxpayer didn't pay either my salary or contributions, since I was paid by private individuals who chose to use their money in that way, but my point is not I personal one.

Comments above are more about atavistic dislike of paying taxes and a transfer of that to those

whose income derives from them than they are about logic. A soldier serves his country and is paid by the taxpayer.

A businessman works for himself and his paid by his customers.

The fact that there is supposedly more choice for the customer than the taxpayer is nothing to do with the service provided which in both cases may be good or bad. As far as paying taxes is concerned I would bet that it is far more difficult for a government employee to avoid or evade PAYE than it is for a businessman to find ways of reducing his tax bill.

[YCCMB]

However, as a large proportion of the money received by local authorities....and thus used to pay the police and teachers, entre autres...is derived from business rates, it could also be argued that businesses are contributing a greater proportion of their taxes towards funding the salaries of public sector employees than are private sector employees. And it's probably more difficult for a business to avoid paying business rates than it is for them to avoid paying tax..

ETA. and, as for quality, if my taxes are paying for a rubbish service, I can't go elsewhere. If I'm at liberty to shop around, then I choose to spend my money as and where I see fit. Even as employees, many provide a service..they're just not compensated by other taxpayers for doing it.

[Oboulez]

Again, than you all for your comments. I will write to HMRC, if it is possible, being even more specific as to my enquiry, and I will report back.

[John Brown]

On the question of is it worth opting out of the DTT

With a local authority pension of 22k and a state pension of 7k you would pay 200 euro a year tax ( 4 euro a week, tax on a UK bottle of wine )

Using the France individual form for your state pension, making it none taxable and not reducing your UK tax allowance you pay less tax on your

local authority pension in the UK balancing the figures.

IMHO You need a LA pension of over 30k to make it worth bothering with

JB 

[Daft Doctor]

One thing I forgot to say was that if you are having forms France Individual signed, I'd recommend that you do as I and Mrs DD did. Take them to your local impots, get them to sign both copies, then tell them to keep the French version to send to the non-residents dept in Paris and give the signed English version back to you so that you can immediately forward it to HMRC in Cardiff. Takes out the (often very slow) middleman and speeds up the whole process!