Tax on Voluntary Redundancy payment

[richyrich2]

Hi. My partner has recently taken VR from her UK based company. The amount is way below the 30k (UK tax free allowance for this payment), but we are unsure how this will be taxed in France where we are both resident. Our local tax office did not really understand the concept of VR, and told us that it should be taxed as normal income which doesn't quite seem fair. Does anyone have any experience with this? Many Thanks.

[John Brown]

It seems a standard reply from some tax offices to treat anything that does not fit a box as "normal income"

Until you get someone along, on here, to give detailed advice my advice would is to drop "Voluntary" and maybe use "Severance" instead of  Redundancy if you enquire further

Think more that your partner jumped ship rather than waiting to be pushed overboard

[idun]

Well simply wouldn't it be called licenciement à l'amiable, it is certainly  a licenciement. And there is nothing odd about it, it certainly fits and ticks boxes in France, and why shouldn't it, it happens!

If the work was done in France, then a french agency of the company will have been set up???? and would come under french rules. If she went to the UK to work, then I don't know.

What I do know is that Sarko changed quite a few laws when lump sums were paid out and many became taxable and worse had cotisations taken from them too! For french residents when tax was to be paid, it may have been possible to split it over several years declarations. But I don't know if this is the case with this. A big amount and I reckon that you need professional advice.

[parsnips]

[quote user="idun"]Well simply wouldn't it be called licenciement à l'amiable, it is certainly  a licenciement. And there is nothing odd about it, it certainly fits and ticks boxes in France, and why shouldn't it, it happens!

If the work was done in France, then a french agency of the company will have been set up???? and would come under french rules. If she went to the UK to work, then I don't know.

What I do know is that Sarko changed quite a few laws when lump sums were paid out and many became taxable and worse had cotisations taken from them too! For french residents when tax was to be paid, it may have been possible to split it over several years declarations. But I don't know if this is the case with this. A big amount and I reckon that you need professional advice.

[/quote]

Hi,

      Voluntary redundancy money, (indemnité de départ voluntaire) , is taxable in full;  however , the tax bill can be reduced by declaring it on form 2042 page 3 , box 0XX at the bottom of the page( revenus exceptionnels et differés).    Give a brief description of the income .   You should opt for the system de quotient, where , briefly put, the amount is divided by 4 and the year's tax calculated, including, and excluding the 1/4 of the redundancy.  The difference between the two figures is then multiplied by 4 and added to the normal tax bill.   If you normally pay no , or little tax , this can be quite advantageous.

[NormanH]

"Our local tax office did not really understand the concept of VR"

Perhaps because you didn't know the French term?

[richyrich2]

Thanks a million, some really useful information. Feeling a lot more positive. Cheers

[idun]

Why are you feeling more positive?  If there are cotisations on it, they will gobble up up to 20% or there abouts.Ofcourse that will depend on where she was working, but if in France, surely she needed to start a french branch of her company and pay dues in France.

[Aly]

Your talking about a good sum of money. Do not rely on the knowledge of people who post on this forum alone as useful as it may be. France has more people working in Impots, ( taxation ) then the US. However the system is a mess with huge varations from one office to the next in interpretation and a lack of will to look beyond the tick boxes.My advise check it out with an accountant who specialises in UK/ French  tax matters or at least with a good French accountant who would be prepared to investigate for you. It may cost you a few hundred but could say you alot more.

France has all kinds of rules relating to Redundancy and your wifes working arrangements do not fit the norm.

You could write to Bercy the head office. But responses can take upto 12 months. But get proper advise

[NormanH]

[quote user="Aly"]Your talking about a good sum of money. Do not rely on the knowledge of people who post on this forum alone as useful as it may be. France has more people working in Impots, ( taxation ) then the US. However the system is a mess with huge varations from one office to the next in interpretation and a lack of will to look beyond the tick boxes.My advise check it out with an accountant who specialises in UK/ French  tax matters or at least with a good French accountant who would be prepared to investigate for you. It may cost you a few hundred but could say you alot more.

France has all kinds of rules relating to Redundancy and your wifes working arrangements do not fit the norm.

You could write to Bercy the head office. But responses can take upto 12 months. But get proper advise

[/quote]

You are undoubtedly right, and I always advise people not to believe all they read on a Forum (or even worse magazines such as the Correction ) but to go to the proper French authority.

I would certainly not go to the sort of UK firm who prey on those whose French is not strong.

In the recent thread about Tax declaration the UK  'advisors' behind the Correction's advice were wrong, and refused to admit it. You would certainly do better to follow parsnip's advice about l'indemnité de départ voluntaire

Go to the French tax authorities if necessary if you don't believe him. Do NOT go to a UK accountant

[Aly]

[quote user="NormanH"][quote user="Aly"]Your talking about a good sum of money. Do not rely on the knowledge of people who post on this forum alone as useful as it may be. France has more people working in Impots, ( taxation ) then the US. However the system is a mess with huge varations from one office to the next in interpretation and a lack of will to look beyond the tick boxes.My advise check it out with an accountant who specialises in UK/ French  tax matters or at least with a good French accountant who would be prepared to investigate for you. It may cost you a few hundred but could say you alot more.

France has all kinds of rules relating to Redundancy and your wifes working arrangements do not fit the norm.

You could write to Bercy the head office. But responses can take upto 12 months. But get proper advise

[/quote]

You are undoubtedly right, and I always advise people not to believe all they read on a Forum (or even worse magazines such as the Correction ) but to go to the proper French authority.

I would certainly not go to the sort of UK firm who prey on those whose French is not strong.

In the recent thread about Tax declaration the UK  'advisors' behind the Correction's advice were wrong, and refused to admit it. You would certainly do better to follow parsnip's advice about l'indemnité de départ voluntaire

I do agree with you Norman. I think many of us know of the rip of advisors.But having said that there are some who are very good both accountants and

tax lawyers.Equally some French accountants who specialise in expat finances are as bad.Richy did approach the French tax authorities who did not seem to be ablle to understand his position. Maybe try a  local French Accountant someone recommended. I got very good advise from Bercy which I was able to show my local office. But they are very difficult to get responses from. It took me a year plus three follow up letters.

Where would you suggest approaching in the tax sytem if you are getting nowhere with your local office?

[/quote]

[parsnips]

[quote user="Aly"][quote user="NormanH"][quote user="Aly"]Your talking about a good sum of money. Do not rely on the knowledge of people who post on this forum alone as useful as it may be. France has more people working in Impots, ( taxation ) then the US. However the system is a mess with huge varations from one office to the next in interpretation and a lack of will to look beyond the tick boxes.My advise check it out with an accountant who specialises in UK/ French  tax matters or at least with a good French accountant who would be prepared to investigate for you. It may cost you a few hundred but could say you alot more.

France has all kinds of rules relating to Redundancy and your wifes working arrangements do not fit the norm.

You could write to Bercy the head office. But responses can take upto 12 months. But get proper advise

[/quote]

You are undoubtedly right, and I always advise people not to believe all they read on a Forum (or even worse magazines such as the Correction ) but to go to the proper French authority.

I would certainly not go to the sort of UK firm who prey on those whose French is not strong.

In the recent thread about Tax declaration the UK  'advisors' behind the Correction's advice were wrong, and refused to admit it. You would certainly do better to follow parsnip's advice about l'indemnité de départ voluntaire

I do agree with you Norman. I think many of us know of the rip of advisors.But having said that there are some who are very good both accountants and

tax lawyers.Equally some French accountants who specialise in expat finances are as bad.Richy did approach the French tax authorities who did not seem to be ablle to understand his position. Maybe try a  local French Accountant someone recommended. I got very good advise from Bercy which I was able to show my local office. But they are very difficult to get responses from. It took me a year plus three follow up letters.

Where would you suggest approaching in the tax sytem if you are getting nowhere with your local office?

[/quote][/quote]

Hi,

     This seems to be the sort of amount where involving "accountants " and/ or "advisers" could diminish the sum recieved even more than any eventual tax would.

There is always the option of not declaring it and seeing what happens .  Provided you respond honestly and promptly to any (unlikely) query from the tax office (ie "they told me in the UK it's tax-free" ) you would be very unlikely to suffer any penalty.

[idun]

And the OP still hasn't said where the work was done, if it was done in France for a UK company then surely, as I said before, a french agency of that company should have been set up and it would come under french rules and as far as I know, these things are not 'free' in France.

I do understand why so many people give 'little' information, I do it my self too. But no one can answer this with so little information. Also, the fact is the the impots can actually answer such questions. Voluntary redundancy and lump sum payments, happens in France too.