Tax resident - best time to move

[ando]

In a year or so my french wife and I intend to move to France where I will become tax resident.

Our income will be a moderate (liveable) company pension and we have funds to buy a house.

With regard to taxation I estimate that we will be better off under the french system.

As my pension will be taxed in England untill such time as I have submitted my 1st french tax return

and thus proved residence, and bearing in mind the french tax system works in arrears .

Question: Is there any time of year at which it would be most beneficial to become resident.

EG is Nov 2009 better than Jan 2010 because presumably this could make a years difference to the time

at which I would submit my 1st tax return and therefore stop paying tax in England.

Can anyone shed any light?

Thanks Ando

[Araucaria]

Ando

I think your guess is right (judging by my own experience). If you are - factually - able to establish residence in France from November 2009 you'll be better off than if you delay it until January 2010. Mostly it is just a question of when you pay the tax and when it stops being deducted in the UK.

The UK's HMRC (in my experience) are very uncooperative (or if you prefer, play strictly by the rules) when it comes to exempting your pension from UK taxation at source. They will insist on a completed and stamped FD5 (now called a form France Individual) before even starting to think about it. This in turn depends on you submitting a first French tax return, as you have to state on the form the date you submitted your last (only) French tax return. The French tax office then stamps the form and it (not you) sends it via the French tax head office to the UK.

If you become French resident this November, you will have one month's worth of pension income subject to tax in France for 2009, and you'll declare it on your French return that you'll be able to make in May 2010. You can then send off the form France - Individual immediately afterwards, and maybe by the end of 2010 you'll find that your UK pension fund stops deducting UK tax. You won't have much French tax to pay for 2009 (one month's income) - it'll be payable in October 2010. You will have payments on account to make to the French tax people in early/mid 2011, but these will be based on your quite low 2009 income, and so you'll defer most of the tax due for 2010 until October 2011.

If you wait until January 2010 the whole timetable slips by a year, and you've no chance of escaping UK tax deduction at source until maybe the end of 2011. You'll have to put up with the deductions at source throughout 2010 and most of 2011 and you'll claim the tax back on your UK tax returns, quite a long time later. The benefit you'll get is limited to not paying any French tax until 2011, but if you become resident in November 2009 it wouldn't have been much tax anyway.

Good luck with the house-hunting.

[Ron Avery]

"As my pension will be taxed in England untill such time as I have submitted my 1st french tax return"

This is not strictly true, you stop having a tax liability in the UK the day after you arrive in France and from that date your pension is taxable in France although not by PAYE and as described above by Araucaria the tax is not payable until the September in the year following your move to France.  What you need to do is make sure that HMRC know you have left the UK by way of Form P85 from your local tax office or download one from www.hmrc.gov.uk. ...........
  and follow the procedures to the letter, a lot who have problems don't do this and then try and circumvent the system by directly posting forms to the UK and then moan about the delays (not you Araucaria... others), but getting tax back and most important your pension paid gross can take a bit of time these days it seems.  The best time to leave the UK depends on your income, you get the free pay from the UK on any UK tax liability and also in France, you might be able to work it so you get the maximum benefit of both allowances.

By the way, you have acquainted yourself with the current health care requirements in France haven't you??

[parsnips]

Hi,

     As Ron has said, you should establish your day of leaving the UK by submitting form P85.

     If you are free to move at any time, the best date to switch tax residency is sometime in August. This means that for that year your UK tax liability is only April 6 till August (4 months or so, giving a refund of UK tax paid (eventually--once all formalities complete), and only 4 months or so of french liability -August till 31 Dec (end of french tax year)so a tax liability is unlikely.

    You will probably have to accept a (quite long) period of double taxation -mainly due to the slowness of HMRC- but you will eventually get back all overpaid tax. 

[mint]

[quote user="parsnips"]

Hi,
     As Ron has said, you should establish your day of leaving the UK by submitting form P85.
     If you are free to move at any time, the best date to switch tax residency is sometime in August. This means that for that year your UK tax liability is only April 6 till August (4 months or so, giving a refund of UK tax paid (eventually--once all formalities complete), and only 4 months or so of french liability -August till 31 Dec (end of french tax year)so a tax liability is unlikely.
    You will probably have to accept a (quite long) period of double taxation -mainly due to the slowness of HMRC- but you will eventually get back all overpaid tax. 
[/quote]

Yes, like 2 years and 2 months and still counting..........[:(]

[ando]

Thanks for your help. Pretty much as i thought and it seems there will always be a period

of double taxation until the British Tax authorities get into gear.

Cheers Ando

[ando]

Thanks for your help Parsnips. Patience will be needed it seems.

Now where can I find some.

Cheers Ando[:)]

[dr orloff]

If income is moderate then the tax on it will be too.  So I would say move whenever you want to.  When you do your income will no longer be taxable in the UK and will be taxable in France.  Until the red tape catches up and tax is no longer deducted at source in the UK then you can always reclaim tax by submitting a UK tax return, so cutting down on the repayments.

Aren't considerations such as when is best to sell or let your house more important?   But fiscally speaking you will be entitled to a full year's allowance in the UK and in France, so move to France after you have accumulated enough post 6th April income to absorb the lower bands of tax.

 

 

 

 

 

[ando]

Thanks Dr Orloff, yes I'm also giving some thought as to when to put the house

up for sale as I don't want the hassle of trying to be a distant landlord. So I have plenty to

think about and am just trying to do as much spadework as I can before the time comes.

Cheers Ando