New UK France Tax Treaty In Force

[dr orloff]

They want to fiond out if they can consider you UK resident. As you have not spent much time there then you will be fine.

[dr orloff]

[quote user="Andy81"]Hi Andyh4,

Yes woke up at 3am yesterday wondering about the not letting it out option! Then again how long do you have to leave it vacant before you can claim it as your "residence principale" 6 monts, 1 year...? As it is curently worded,

if there are no tenants in the flat, it is available to me and in such a case it is up to me to elect which is my residence principale, despite the fact I live and work in France and my residence principale is blatantly my french one ( though I am not owner this seems to count for nothing!) Thanks for the replies re. rental income income...bit of a bummer if I declare them as I will go up a "bareme" on my tax declaration!

Thinking about going to see a tax inspector at the hotel des impots but have a feeling I would be putting myself into "la guele du loup" as someone put it to me today! Apparently they dont let go once they get a grip of you, probably best to wait and see. Like someone stated, I have done a lot of work on my property in UK, how is that factored? Seems a nightmare. Best option will be "residence principale" or waiting 15 years as far as I can see. Just need some definitive info. on the "residence principale" bit!

Cheers, Andy.[/quote]

If you live in France you cannot claim your UK property as your principal residence, whether it is rented out or not.

You cannot elect your principal residence. That is under UK tax law, but as you live in France then it is French tax law that determines your principal residence and that is straightforward - your house in France.

[dr orloff]

[quote user="Loire"]I'd be grateful if someone could confirm that I have understood correctly the situation as regards capital gains on my uk property under the new French law. Any light than can be shed on my situation as far as uk capital gains goes would also be gratefully received.

I'm a uk resident with my main home there, which I have owned for 15 years in September. I have a second home in France. I should like to become a French resident this tax year, and live all the time in my house in France. If I rent out my uk property, then later sell it, when I sell it, the question of French capital gains tax will arise. Even if I were renting it out, is it the case that if I sell it after 15 years, I have no capital gains liability in France? (If anyone knows whether I would be liable for any uk capital gains tax as it would no longer be my main residence, I'd be very grateful - my call to the tax office was, shall we say, unelightening.)

If I were to sell the uk property, probably before September, and become a French tax resident immediately after, would I still have no capital gains liability? Would the same apply if I were to put it on the market immediately after becoming a French resident? My understanding, but might need to be corrected, is that I wouldn't have such a liability.

My understanding is that if I do rent out my uk home, social charges might be payable in France on the rental income. I've seen conflicting reports on whether or not they would. Anyone able to clarify please?

Thanks very much.

Kind regards

Loire[/quote]

As you have owned your UK property for over fifteen years then you will have no liability if you sell it whilst French resident.

Bear in mind that there was some serious discussion last year about scrapping the fifteen year exemption. It wasn't adopted for this year but it could be a possibility in future years.

If you rent your UK house then it is not taxable in France. It is taken into account for the 'taux effectif' but it is not taxable and therefore does not attract social charges.

[mint]

Dr Orloff says:  if you rent your UK house......

Do you really mean if you let it?  That is, you allow someone else to live in it for payment?

Or am I the only person who is confused? 

In my book, if you rent a place, you are paying rent to a landlord in order that you could live in it.

[dr orloff]

Technically you are correct, I should have written rent 'out', but I inadvertently omitted the word 'out'. Since the reply was in direct response to a question about renting out a UK property and it's pretty obvious for normal people that you wouldn't live permanently in France and PAY to rent a property in the UK then it doesn't require too much intelligence to work it out.

But it's nice to be reminded every now and again that it's often not worth bothering to dispense sound advice on these forums as there's always someone trying to prove how smart they are.

[parsnips]

Hi,

 To sum up, provided french rules don't change, you will not be liable to french CGT on the UK house ,whenever you sell it.

  At present the UK does not tax non-residents on the sale of UK sited real estate. However, there seems to be (in the new treaty) a possibility that you might become subject to UK CGT on the sale of the UK house, if you became UK resident again within 5 years of the sale. The relevance of this will become clearer with the passing of time and some case histories. 

[dr orloff]

[quote user="parsnips"]

Hi,

 To sum up, provided french rules don't change, you will not be liable to french CGT on the UK house ,whenever you sell it.

  At present the UK does not tax non-residents on the sale of UK sited real estate. However, there seems to be (in the new treaty) a possibility that you might become subject to UK CGT on the sale of the UK house, if you became UK resident again within 5 years of the sale. The relevance of this will become clearer with the passing of time and some case histories. 

[/quote]

The five year 'temporary non-residence' rule has been around for a while now and is not new to the new treaty. Indeed it's not really to do with the UK France tax treaty as it does not matter which country you return from. What it does mean is that if your French tax were nil then you would be subject to a UK tax liability should the situation arise. Although previous periods of primary residence plus the last three years are excluded from the gain, so the likelihood is that it wouldn't be very much.

[mint]

[quote user="dr orloff"]Technically you are correct, I should have written rent 'out', but I inadvertently omitted the word 'out'. Since the reply was in direct response to a question about renting out a UK property and it's pretty obvious for normal people that you wouldn't live permanently in France and PAY to rent a property in the UK then it doesn't require too much intelligence to work it out. But it's nice to be reminded every now and again that it's often not worth bothering to dispense sound advice on these forums as there's always someone trying to prove how smart they are.[/quote]

No need to withdraw your "sound advice" just because I pointed out a small difference in terms (small but critical, I would have thought).

No, you carry on dishing out all the advice you wish.  I just happened to drop in and, to my ears, your sentence sounded ambiguous.

And I have NEVER claimed to be smart:  in fact, my advice, such as it is and when I choose to offer it, is always given with some qualification.

As you yourself have implied, I don't even possess "too much intelligence".........only why not try to dispense your advice, however "sound" with some small sense of humour?  That way, your posts would be all the pleasanter to read and us, lesser mortals, could benefit from them without feeling too mentally challenged.[:D]

[dr orloff]

Well I didn't see any humour in your criticism. If you're claiming not to be smart don't act like a smart arse.

[mint]

As a doctor, you'd know all about humour by-passes, wouldn't you?

Me, I'm only "not too intelligent", so wouldn't know anything about that.

Edit:  didn't realise that putting up my hand and pointing out the difference between "rent" and "let" could be construed as "criticism" but, there you go, it takes all sorts, as the saying goes.[I]

[allanb]

Dr O: you made a small mistake in a technical statement, and somebody pointed it out.  That's what happens in discussions.  In reply to Sweet 17's message, if you had just said "yes, I meant let", that would have been the end of the episode. 

[dr orloff]

And if sweet17 had simply pointed it out with a simple reply along the lines of "I think you meant rent 'out'" rather than give me a condescending definition of what rent means then that would have been been the end of the episode.

I'm sorry I attempted to give some advice. I shan't bother again.

[Loire]

Dr Orloff

Thank you very much for your sound advice and for pointing out the possibility of a future change to the 15 year rule.

Seems that the renting- out option is viable for me without onerous terms as far as taxation is concerned. That is what I had hoped for.

Please do continue to give your accurate, clear, concise and very helpful advice.

Kind regards

Loire

[dragonrouge]

\i could if I so wished let us have a legal definition of both rent and let and indeed the various stated cases on the subject.

I will not bother for its boring and knowing Sweet 17 rather well but from a distance I am not too sure she would pay me for it legal advice I mean!

From my standpoint I believe that this forum exists to provide a conduit for all of us to learn from the experiences of others here in France.

We all from time to time are guilty of typo's and grammatical errors and thus they can and indeed affect the context of the discussion. It is just one of those things.

Me I am from Porth in the Rhondda I know nothing except it is very cold this morning and next Saturday I am not watching TV.

[Sunday Driver]

[quote user="dragonrouge"]

\i could if I so wished let us have a legal definition of both rent and let and indeed the various stated cases on the subject. I will not bother for its boring ....

[/quote]

Thank Gawd for that........[;-)]

 

[CeeJay]

dragonrouge

Me I am from Porth in the Rhondda

Sorry about that....my other half is from Treherbert and I remember it well back in the 60's travelling up the valley from Cardiff station. Her Grandfather told her it was the last place God made!!!!!!!

Apologies to all, nothing to do with the posting I know!!

[getting there]

This might be of help. I received it a couple of weeks ago from blevinsfranks

The 2008 Double Taxation Convention

Between UK and France

applies from 1st January 2010 for French residents.

What are the main changes?

Gains arising on disposals of UK property will be taxable in the hands of French residents (as well as being subject to social charges) unless owned for at least 15 years;

The wealth tax holiday in the treaty applies (although it is unknown how it will apply to people already here);

French resident pilots become taxable on their worldwide employment income in France even if they don't fly in and out of France;

Social charges included in the treaty – so UK tax paid on UK-source income can now be offset against French social charges.

The mail also included a link to an interesting France tax guide

http://www.blevinsfranks.com/DCEN.12_11_DownloadCentre.aspx

[dragonrouge]

I am sorry but the last place on earth is Maerdy in the Rhondda and following that Blaencwm which is very near Treherbert. I will have nothing said against Treherbert in that you can use the mountain road to get out of TH.

[Loire]

Thank you very much Getting There. That's very helpful.

I managed today, at last, to chance upon an excellent website that covers tax for the uk and other countries.Just about everything anyone could ever need to know about tax is there.www.taxationweb.co.uk.

I did a mobile support job in various towns in the Rhondda Valley, not too far from where I lived in Wales, and found the people there to be the most welcoming and kind I have ever met. You could always get a good bacon sarnie there too.mmmmmmmm

Regards

Loire

[Debra]

I thought one of the points of this new treaty was that they would get you both ways and eliminate the loop hole that used to exist in that you could move and sell your property in the old country and not pay CGT as long as you didn't move back within 5 years?

Admittedly I haven't read it since it was first proposed but I seem to remember the new treaty meant that in the OP's situation after becoming resident in France, if you weren't taxed in France because of the 15 year rule, you would still pay tax to the UK, who would now be able to charge you as a non-resident, and if you were taxed by both countries under their different rules (ie owned the property less than 15 years), the taxes were offset against each other somehow?

If the above is totally wrong I need to go off and read it all again...... (I'd rather not, hence being lazy and questioning it here!)

[dr orloff]

The UK doesn't charge CGT on UK property to non-residents.

[Debra]

OK I tried reading it anyway but can't figure it out really.  It still says gains from immovable property are taxed by the 'contracting state' they are located in.  It also says that if the law of the contracting state allows, they will be taxed by the contracting state of residence if the person has been resident in the last six years or is currently resident.  Then there are bits about who gets first bite and handles the double taxation part. 

So does France already have a law that immovable property elsewhere can be taxed by them and the UK doesn't have that rule and was this rule somehow negated in the old treaty but given full reign in the new one?  If so, I expect the UK will soon have that rule also.  If not, surely there is no change via this treaty, only if the relevant contracting states have such laws or implement them? 

Sorry if I'm being dim but I understood all this ages ago when it was first being discussed and seem to have lost that little store of knowledge somewhere along the way.......

[Debra]

[quote user="dr orloff"]The UK doesn't charge CGT on UK property to non-residents.[/quote]I know.  The treaty seems to allow them to if they change their policy (I thought that was supposed to happen, so is it not going to?) France does (charge CGT on French property to non-residents, just not social charges).  However,  does France charge CGT on UK properties?  Does UK charge CGT on France properties?  If neither country charges CGT on foreign properties anyway, then has the treaty changed anything yet? Does it not just invite the UK to charge CGT to non-residents as per French policy?  

[dr orloff]

[quote user="Debra"]OK I tried reading it anyway but can't figure it out really.  It still says gains from immovable property are taxed by the 'contracting state' they are located in.  It also says that if the law of the contracting state allows, they will be taxed by the contracting state of residence if the person has been resident in the last six years or is currently resident.  Then there are bits about who gets first bite and handles the double taxation part. 

So does France already have a law that immovable property elsewhere can be taxed by them and the UK doesn't have that rule and was this rule somehow negated in the old treaty but given full reign in the new one?  If so, I expect the UK will soon have that rule also.  If not, surely there is no change via this treaty, only if the relevant contracting states have such laws or implement them? 

Sorry if I'm being dim but I understood all this ages ago when it was first being discussed and seem to have lost that little store of knowledge somewhere along the way.......

[/quote]

There is a subtle but important error in what you write.

The convention does not state that gains from immovable property are taxed .. etc.

The convention states that gains may be taxed...etc

And the UK does not currently tax gains on non-residents.

[dr orloff]

To answer your latter post. Quite a lot of questions, the quote thing doesn't seem to work.

Does France charge CGT on UK properties? (for French residents)

Under the old convention, no. Under the new one, yes.

Does UK charge CGT on these properties?

No - the UK does not charge CGT to non-residents. The treaty allows it, but they don't. It's not just a UK France thing the UK doesn't charge any non-resident.

Does it not just invite the UK to charge CGT to non-residents?

No. That's matter of UK policy - nothing specific to this convention.