Tax declaration - confusion about where to mention exempt income

[Maria]

We were told that we should make a tax declaration in France despite (as we thought) all of our income being tax exempt in both the UK and France.  We did so.  Our income consists of:

1) A tax exempt military disability pension

2) A tax exempt war pension

3) Long term incapacity benefit paid by the UK (which we were also informed was exempt)

and though we were told and it seemed reasonable that none of the above should be declared on our tax return, when we went to the tax office we were told to declare this in secion VII of form 2047 and box TI of form 2042 on the tax form.  This means the above income is used to ascertain our RFR.  Reading various postings on this forum it seems we may have been incorrectly advised at the tax office, since the RFR is supposed to reflect taxable income.  It seems none of the income should have been declared at all - or maybe just the incapacity benefit, which is taxable in the uk?

We were also told to enter our income for the whole of 2007, even though we didn't arrive in France until May 2007, and now wonder if this is also incorrect, after reading the forum postings.

Having already submitted the tax return I'm wondering if it was correct and if it wasn't, is it possible to/is it necessary to/is there any benefit in trying to correct it?

Hopefully someone can help as my  mind is totally boggled by all the stuff I've read on here!

[Bob T]

First of all a military pension is not UK tax exempt, you may not pay UK tax if it is below your personal allowance though. The war pension is tax exempt in the UK and you will not pay UK tax on that at all.

Both must be declared on your French tax return as they are income.

I should know as I also have a military and a war pension and I have been declaring mine for the past 3 years.

Hope this helps.

[Benjamin]

Bob T has covered the military side which I know nothing about.

Your incapacity benefit should be entered in box AS or BS (as appropriate) on form 2042 as it is taxable in France irrespective of whether or not it was taxable in the UK.

You should have proportioned your income from the date you arrived as residents in France and not entered the whole year amounts.

It would be interesting to learn where you were receiving your advice from.

[cooperlola]

Bob and Bejamin are correct afaik.

I really do think you need to sort this out, as you are probably going to end up paying the wrong amount of tax - possibly more than you should particularly since you have declared the whole year, when you should have declared only from the date of arrival, as Benjamin says.

My own instinct would be to fill in another tax form - the FAQ's HERE explain which boxes to put everything in - CORRECTLY (based on the info' given above - like Benjamin, I know nothing about tax expempt war pensions, but it's clear that Bob does), and then go along to your tax office and explain that you appear to have been given poor advice, and that the new form is, to your best belief, now correct.  If you let this drift, then you could be in for a nasty shock when your bill comes in.

If the person who gave you the advice in the first place was a professional registered here in France and you paid them for it, then s/he is liable for any errors made - not you.

[Maria]

[quote user="Bob T"]First of all a military pension is not UK tax exempt, you may not pay UK tax if it is below your personal allowance though. The war pension is tax exempt in the UK and you will not pay UK tax on that at all.

Both must be declared on your French tax return as they are income.

I should know as I also have a military and a war pension and I have been declaring mine for the past 3 years.

Hope this helps.

[/quote]I beg to differ, Bob - a military pension is UK tax exempt if it is a SAP - service attributable pension, granted because of injuries which are deemed attributable to your military service (which could be true of yours since you have a war pension).  If your military pension is classed as 'attributable' and you are paying UK tax then you are doing so incorrectly and should claim it back.  Under article 19 of the double taxation treaty, such pensions are exempt in France if they are exempt in the UK but what is not clear is whether they should be declared under section VII of form 2047.  This section seems to deal with taxable income which is taxed by another government and therefore maybe should exclude income which is tax exempt.  This is what I am unclear about.   The lady at the tax office advised us to put  everything in box VII - but I am unsure of the correctness of this, especially for the incapacity benefit, which is taxable in the UK (I think) but which this lady said is not taxable in France.  It's not a matter of what tax we will pay as it has been classed as non taxable in France - but the RFR may be wrong as it includes all of this income and we're not sure what else this RFR might be used for.  We'd like to get it right this time (if we can hopefully change it if it is wrong) otherwise it will look odd next year if we don't declare something we shouldn't have declared this last time, if you see what I mean......

[Ron Avery]

Why are you or the tax official come to that, bothering too much about what goes on the 2047? Its only a calculation sheet.  Its where you put those amount on the 2042 form that counts and all that is shown in the FAQs in this section.

There are a lot of things not taxable in the UK that are taxable in France, so don't use that as a yardstick for anything. As we all know from bitter experience, ask 10 tax officials the same question and you get 10 different answers.  If you are on an E 121 for health care then the only reason I can think of for using the RFR is possibly tax habitation or TV license exemption or if the IB is withdrawn following the up and coming reviews in the UK of all IB claimants ability to work and you then have to go on the CMU.

[Bob T]

[quote user="Maria"][quote user="Bob T"]First of all a military pension is not UK tax exempt, you may not pay UK tax if it is below your personal allowance though. The war pension is tax exempt in the UK and you will not pay UK tax on that at all.

Both must be declared on your French tax return as they are income.

I should know as I also have a military and a war pension and I have been declaring mine for the past 3 years.

Hope this helps.

[/quote]I beg to differ, Bob - a military pension is UK tax exempt if it is a SAP - service attributable pension, granted because of injuries which are deemed attributable to your military service (which could be true of yours since you have a war pension).  If your military pension is classed as 'attributable' and you are paying UK tax then you are doing so incorrectly and should claim it back.  Under article 19 of the double taxation treaty, such pensions are exempt in France if they are exempt in the UK but what is not clear is whether they should be declared under section VII of form 2047.  This section seems to deal with taxable income which is taxed by another government and therefore maybe should exclude income which is tax exempt.  This is what I am unclear about.   The lady at the tax office advised us to put  everything in box VII - but I am unsure of the correctness of this, especially for the incapacity benefit, which is taxable in the UK (I think) but which this lady said is not taxable in France.  It's not a matter of what tax we will pay as it has been classed as non taxable in France - but the RFR may be wrong as it includes all of this income and we're not sure what else this RFR might be used for.  We'd like to get it right this time (if we can hopefully change it if it is wrong) otherwise it will look odd next year if we don't declare something we shouldn't have declared this last time, if you see what I mean......

[/quote]

A military pension is a pension that is payed to any person who has served for the minimum number of years (in my case 22) to qualify for an instant pension. An invalidity military pension (SAP) is one paid to someone who has be medically discharged from HM services and a war pension is one paid to a person whos health has suffered because of military service.

A standard military pension is taxable if it is above your tax free personal allowance in the UK and will be taxed by the UK at all times. The war pension is indeed not taxable in the UK at all. I cannot speak for a SAP as there are very few people who get this compared to those with a military pension.

My military pension was taxed in the UK, but is so small that it was a minor amount and since April is no longer taxed due to the personal allowance change, this will change when I become 55 and my pension go up by a large amount and is then index linked too. My war pension was never taxed.

As the rule in France is to declare world wide income, both are put on my French tax return. I do not , however, pay any tax here as the amount is too low.

[cooperlola]

AFAIK, ICB is taxable in France, but others on here receive this so can answer this for sure.  Assuming I am correct about this (!) then you need to be sure you're not still paying tax on this in the UK.

Any income taxed in the UK (and that would include income where tax would be payable in the UK, but which is exempt there) is taxable there but is, indeed, used to calculate your RFR.  The RFR is used to calculate other charges, such as those you might pay towards your healthcare (not applicable to anybody who is above UK state pensionable age) and the social charges and, as below - to calculate your overall tax band for your total income, which may include state old age pension, which is indeed taxable in France, not the UK.

Income taxable in the UK is declared as per the    q&a:

"Q          As ex service personnel, my partner and I receive a service pension from the UK government and they are taxed at source. As we have already paid the tax on our pensions in the UK, do we really need to declare them in France?

 A          Yes, service pensions are public sector pensions, subject to tax in the UK and covered by the Double Taxation Treaty, but they will still need to be declared in France.  So, on form 2047, your gross pension goes in section VII. REVENUS EXONÉRÉS PRIS EN COMPTE POUR LE CALCUL DU TAUX EFFECTIF - the form explains which figures go where.  You then transfer the total to box TI on your form 2042. 

Although you've declared it, your service pension is not taxed in France, but it is taken into account for determining which tax band your other taxable income falls into. 

That's it for your service pension."

 

Any part of your income which is taxable in France should be entered thus:

 

Q         I have a UK non-public sector pension - how do I declare this?

A         Company pensions and the UK old age state pension are entered (gross) on form 2047 section I. PENSIONS, RETRAITES, RENTES.  The totals then go across to box AS/BS on the 2042.  

 

Hope that makes sense.  I know what I mean, but have trouble conveying it precisely!  Where is Sunday Driver when you need him?[:-))]

[Sunday Driver]

The revenu fiscal de reference is the income you receive which is subject to tax, after allowances.  The income from your UK pensions and IB is taxable in France, but under the Dual Taxation Treaty, the tax due on the UK pension income is effectively credited off, leaving just the IB taxed here, albeit at a higher rate.

The RFR is also used as the basis for certain means tested benefits such as couverture maladie universelle, exoneration from property taxes, and so on.  So, whilst your French tax bill may be small, your actual income may be large, therefore the RFR will limit your access to benefits which are clearly intended for those people on low incomes.

[cooperlola]

Right here, obviously.[:D]

[Benjamin]

[quote user="Maria"]The lady at the tax office advised us to put  everything in box VII - but I am unsure of the correctness of this, especially for the incapacity benefit, which is taxable in the UK (I think) but which this lady said is not taxable in France. 

[/quote]

I don't know who or where this tax lady is but the part of this sentence relating to Incapacity Benefit this is wrong irrespective of how long ago it was awarded. See my earlier post.

It would still be advantageous to the forum if you could give an idea where you received your initial information.

[cooperlola]

NEVER trust what one individual at your tax office tells you.  It took me months to convey to my own office that I should be paying my taxes in France, in spite of the fact that an official in the same office had signed a form to that effect and I had been given all my UK tax back as a result.  Get this sorted because you  do not want to end up with penalties for any misdeclaration - which can happen even if the info' you had came from the tax office (most particularly if it is not in writing). 

[allanb]

[quote user="Maria"]Under article 19 of the double taxation treaty, such pensions are exempt in France if they are exempt in the UK but what is not clear is whether they should be declared under section VII of form 2047. [/quote]

I think the following is relevant, from the official commentary on the tax declaration ("brochures pratiques") published on the government's tax website* :

NE DÉCLAREZ PAS ...

... les pensions militaires d'invalidité et les pensions des victimes de la guerre (pensions militaires d'invalidité proprement dites, allocation temporaire aux grands invalides, allocations aux grands mutilés de guerre, indemnités de soins aux tuberculeux, pensions de veuve de guerre) ...

(among many other things)

Evidently this kind of pension is not only tax-exempt in France, but is not even required to be declared.

*PS: sorry, I meant to provide a link:

http://doc.impots.gouv.fr/aida/brochures_ir2008/ud_027.html

[Maria]

    Benjamin - the lady at the tax office, as I thought I had explained, is just that - the lady at the tax office, our head office for impots, to which we had to go to submit a late tax return.  She took the form from us and entered into their computer, after telling us where to put stuff in the first place.

Bob - there is also a distinction between a SIP and a SAP and the latter is where the injuries which caused the medical discharge where attributable to military service and this is what makes the SAP tax exempt, just like the war pension.  A SIP is not tax exempt.

Alanb - this is what I thought, so I guess we should go along to the tax office and explain that two parts of what we declared should not have been and the IB should be in a different box.  Trouble is, I'm not clear on which box as some seem to think it should be in one of the boxes where French income is declared (A something) and others think it should still be declared as foreign income which is taxable in France. 

I wonder how the tax office will handle things being changed.  Anyone else had to do this?

[Boiling a frog]

Can I suggest that your particular circumstances  are highly unusual. The lady at the tax office has probably never come accross a British person in receipt of a SAP so took a guess at which boxes to complete.

I would also not rely too much on AlanB's post re exemtions from declaring war pensions,as that ,to my mind would apply to people in receipt of a French war pension.

You would be better going back with a native French speaker who understands what pensions etc you are in receipt of ,who knows the British system for awarding these pensions and who knows the French taxation system.

Yes it is a tall order.

Or perhaps use a specialised taxation advisor with knowledge of the French and British system.

Or just accept what the tax woman says,as by completing Box TI you will not pay any tax in France ,presumably you have an E121 so you do not pay health charges via CMU so the only other thing it would affect could be a reduction in your tax habitation. 

[allanb]

Maria: your circumstances may be unusual but they will still be determined by the UK/France tax treaty, which states that certain kinds of pension are are exempt from tax in France as long as they are exempt in the UK (and vice versa).

The trouble is that the definition refers to other legislation, so unless you already know which category your pension falls into, you may beed to consult an expert, as BaF suggested.  However, the essential qualification for your expert is that he understands the treaty. 

Here is a sample (the underlining is mine):

The pensions referred to in Section 315(2) of the Income and Corporation Taxes Act 1988 and injury and disablement pensions payable under any scheme made under the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939 or the Personal Injuries Emergency Provisions) Act 1939 shall be exempt from French tax, regardless of the nationality of the pensioner, so long as they are exempt from United Kingdom tax.

This is from article 20 of the "new" treaty, which has existed since 2004 but has only recently been ratified.  The new article 20 replaces the old article 19, and unfortunately the

definitions are different (although they may still refer to the same

kinds of pension).  I don't know when the new one becomes effective in a particular case, which is another complication.  

I will bet that the lady in the tax office, unless she's a complete beginner, knows about the treaty.  She may not be familiar with all of its details, but she shouldn't be surprised if you quote it.

     

[Hibou]

Hello.  I know this is now quite an old post.  My husband also receives a war pension as well as his military pension. As we know it is tax free in UK but have they taxed you on it in France?  I can't find anyone who knows if a war pension is actually taxed here.

[Debra]

It is not taxed here.  Nor is a military pension if it is a SAP.

[Debra]

Just to clarify this - if the pensions are exempt from French Tax (as well as UK tax) that does also mean they are not actually declared anywhere on the tax return doesn't it?

In the tax guide here http://doc.impots.gouv.fr/aida/brochures_ir2012/ under PENSIONS, RETRAITES ET RENTES and NE DECLAREZ PAS it says "les pensions militaires d'invalidité et les pensions des victimes de la guerre" but I just want to make sure.....

[parsnips]

[quote user="Debra"]Just to clarify this - if the pensions are exempt from French Tax (as well as UK tax) that does also mean they are not actually declared anywhere on the tax return doesn't it?

In the tax guide here http://doc.impots.gouv.fr/aida/brochures_ir2012/ under PENSIONS, RETRAITES ET RENTES and NE DECLAREZ PAS it says "les pensions militaires d'invalidité et les pensions des victimes de la guerre" but I just want to make sure.....

[/quote]

Hi,

   That is correct, you simply don't declare them anywhere .  ( I realise that for France, that does seem amazing, but it's true).

[Debra]

[quote user="parsnips"][quote user="Debra"]Just to clarify this - if the pensions are exempt from French Tax (as well as UK tax) that does also mean they are not actually declared anywhere on the tax return doesn't it?

In the tax guide here http://doc.impots.gouv.fr/aida/brochures_ir2012/ under PENSIONS, RETRAITES ET RENTES and NE DECLAREZ PAS it says "les pensions militaires d'invalidité et les pensions des victimes de la guerre" but I just want to make sure.....

[/quote]

Hi,

   That is correct, you simply don't declare them anywhere .  ( I realise that for France, that does seem amazing, but it's true).

[/quote]Thank you, Parsnips.  I'm just having a bit of difficulty explaining to CAF why I still need to declare resources separately to them because I no longer include this income on our tax return, having been told it is not declarable.  They keep telling me they take all income into account, French and foreign - I don't think they understand that it is not declarable and it's not my fault that they only take info directly from the tax return nowadays and I am doing my best to make sure they still know about it!

[parsnips]

[quote user="Debra"][quote user="parsnips"][quote user="Debra"]Just to clarify this - if the pensions are exempt from French Tax (as well as UK tax) that does also mean they are not actually declared anywhere on the tax return doesn't it?

In the tax guide here http://doc.impots.gouv.fr/aida/brochures_ir2012/ under PENSIONS, RETRAITES ET RENTES and NE DECLAREZ PAS it says "les pensions militaires d'invalidité et les pensions des victimes de la guerre" but I just want to make sure.....

[/quote]

Hi,

   That is correct, you simply don't declare them anywhere .  ( I realise that for France, that does seem amazing, but it's true).

[/quote]Thank you, Parsnips.  I'm just having a bit of difficulty explaining to CAF why I still need to declare resources separately to them because I no longer include this income on our tax return, having been told it is not declarable.  They keep telling me they take all income into account, French and foreign - I don't think they understand that it is not declarable and it's not my fault that they only take info directly from the tax return nowadays and I am doing my best to make sure they still know about it!

[/quote]

Hi,

    If I were you, I would write to them (or email) explaining the situation, and send" récommandé avec accusé de reception", and leave them to do what they see fit; you  will have proof that you gave them all the information.

[Debra]

[quote user="parsnips"]Hi,

    If I were you, I would write to them (or email) explaining the situation, and send" récommandé avec accusé de reception", and leave them to do what they see fit; you  will have proof that you gave them all the information.

[/quote]I've written to them and provided the information (including copies of pension advices) but I haven't sent it AR, though I have copied it to them online too (and that is visible still).   Hopefully they will realise what I'm actually saying before it might affect us next year.  It doesn't help that a different person deals with the file every time we contact them, even on the same subject - and they only deal with the letter or email in hand and don't check what other correspondence they have in their queue, waiting to be dealt with.  Emails get dealt with first, before letters, to confuse matters even further!

[Bercy]

I am having the exact same problem.  I have non declarable income from the US but CAF is insisting that I declare it.  Can you please keep us posted as to how you resolve it with CAF.  It is very frustrating.  Thanks so much.

[Debra]

I didn't get a further reply after explaining that the income I was telling them about was exempt from tax in both the UK and France.  I've just checked my situation details on the CAF account online and they have updated the resources amount for 2011 (Ces revenus permettent de calculer vos droits pour l'année 2013) and it shows the taxable amount declared on our tax return - the whole amount not the RFR that came back on the avis.   I'll let you know if this causes any problems with payments or later on this year if we apply for a permanent resident card.