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Life assurance?


JohnRoss
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Whilst starting to fill in the on-line tax declaration a box opened up saying that if you did not declare accounts held outside of France terrible penalties would be imposed. It also said that life assurance policies finished in that tax year should also be declared. Now the better half had a small high yield savings account with Teachers Assurance finish last year(2008), not so high yield and a building soc would have paid more, and there was a life assurance element on death during the term of the policy. I assume this should be declared but where on the 2042 form do you put it? Can you indicate the actual profit, small though it is, i.e. amount paid in subtracted from the amount paid out and where do you put it with what other information? Cheers...........JR

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I don't know the answer but we surrendered two policies last year and MOH is planning to go to our local tax office and ask if they should be declared. I assume he'll also find out how to declare them. Mine was a very small amount and I'm not sure there was any profit involved - I haven't done the sums.

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Comment from another web site. "Assurance vie is not Assurance décès which up till now are not declarable". So which of these, if either, would be say an investment bond be which had a life insurance element which would only be applied if the bond holder died before maturity or a savings account under the same conditions like the Teachers savings account I referred to earlier?

There must be a lot of folk with either of these investments. That is either a bond purchased for a lump sum which eventually matures and pays out more than the initial investment, fat chance at the moment in some cases, or an account where you make regular monthly payments and hope that when it matures you get more back.

There is, of course, the third type where you start it with a lump sum and sell off units at regular intervals thus creating an income until the bond runs out like a CMI premier bond for example. Are these all to be treated the same way for tax purposes or if not how are they to be individually declared? They all have life assurance elements. It would seem logical to treat the first two as simple interest when the bond or account matures and pays out, assuming the bond holder or account holder has not yet died, and only declare that then or is that too simple? The third type, I assume, would have to be declared on the profits of units sold each year or least that is what we have been told. This would seem to be declared like UK building society interest and taxed in the same way.....................................JR

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MOH went to the tax office today and was told that any Assurance Vies (it will have been clear that these were UK Life Assurance policies that we were asking about) which are more than 8 years old do not need to be declared on the forms. But on a separate sheet, in a similar way to bank accounts we should give details of the policies e.g. company, policy number, start date, end date. Apparently information on currently held policies should also be given - we should have done this last year but didn't know. So we will be giving those details but no information on amounts involved. My policy was a very simple whole of life assurance policy. I don't know the details of MOH's policy.
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That is interesting Lorna. Does this mean that the wife's teachers High Yield (in a pig's eye) Savings Account with a life insurance element which has been running for 15 years and would have paid out a certain sum if she had not made it and paid out last year does not need to be declared at all? She paid in an amount each month and it matured last year for very little profit, none if you take devaluation into account!......................................JR
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Lorna. It all depends upon the question that is asked.

Did you ask

"Do i need to declare the existence of a UK based policy" or did you ask

"Do I need to declare profits withdrawn from a UK based policy"

The tax advantages of a French Assurance Vie policy do not apply to a UK policy unless the company providing it has offices in France and the policy is approved in France, so the "8 years old" has no relevance in this case which suggests  a communication problem or a lack of understanding somewhere, however it all comes back to the question that is asked.

The answers to the above are;

Yes and yes, and any profit is taxable & subject to social charges in France, unless it was taken out before 1st Jan 83 or it meets other specific conditions.

As I understand it.

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Hi LL, well mine was taken out before '83 so I guess that one is safe. I'm pretty sure MOH's was late 90s - he is out at present so I will read him your post when he gets back. I'm fairly sure that MOH would have made clear that these were UK policies and that they had been surrendered - I will ask him again. This is the first time that I have heard that the existence of UK policies needs to be declared. Last year was the first year that we were liable for tax here and we thought we had researched pretty thoroughly. We listed all our bank and savings accounts but it never occurred to us that life policies needed to be declared and if it hadn't been for surrendering them last year we might still not be aware (although your post if you had made it might have stirred us into action). I'm sure there must be lots of others who are not aware of this requirement.

JR, LL is clearly knowledgeable on this subject, maybe he can help you. I'll let you know what we do. MOH does our forms and I suspect that having asked once at our local office he will just give details of the policies as that is what he was told to do.

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"This is the first time that I have heard that the existence of UK policies needs to be declared."

The 1999 Finance Law introduced the requirement to declare details with the tax return if you start, contribute to or withdraw from any non French life assurance policy.

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That is very useful information, I am just surprised that all of the anglo sites that disseminate such information for those of us who are not legal eagles don't mention it - at least the ones that I looked at certainly didn't. Such policies are fairly common in the UK so I would imagine that lots of people have them and I would be surprised if people know they should be declared. I will suggest to our mods that the FAQs are updated with the information.
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The 1999 Finance Law introduced the requirement to declare details with the tax return if you start, contribute to or withdraw from any non French life assurance policy.

At the risk of being called a pedant what if you have the policy before moving to France and make no further contributions or withdrawals. I ask this because we have a policy in that situation and which has not made any profit in fact a significant loss since it started! Does its existence need declaring?...........................................................JR

PS I have put this and other questions to Siddalls who have passed it to their French office. When I get a reply, soon I hope as the 29th is not far away, I will pass on any useful information.

 

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[quote user="JohnRoss"]

The 1999 Finance Law introduced the requirement to declare details with the tax return if you start, contribute to or withdraw from any non French life assurance policy.

At the risk of being called a pedant what if you have the policy before moving to France and make no further contributions or withdrawals. I ask this because we have a policy in that situation and which has not made any profit in fact a significant loss since it started! Does its existence need declaring?...........................................................JR

PS I have put this and other questions to Siddalls who have passed it to their French office. When I get a reply, soon I hope as the 29th is not far away, I will pass on any useful information.

 

[/quote]

Hi John,

        The notes to 2042 say that if any member of your household has taken out an assurance you should declare the details;as it goes on to say  you should also give details of any operations or reimbursements I take it to mean you should declare any foreign assurances held irrespective of whether any operations have taken place. If, as you will probably agree, you should declare (the gains on) any assurance if you ultimately make any, then why not give details each year, as no tax will be due unless (possibly) when you make a withdrawal which includes a  a profit. The notes go on to say that non-declaration risks sanctions, so why take chances.

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John. You should take note of Parsnips wise words.

Lorna. If you want a (very looose) rule of thunb " Tax free in UK usually means taxable in France" if you start from that position you can only be pleasantly surprised.

For example, Tessa's, Isa's, Pep's, Endowments, Pension lump sums, Premium Bond winnings, can all be taxable in France. Many people worry about French inheritance tax but as a French tax resident expat they may have more cause to worry about UK inheritance tax!

There are however ways of investing in France which are tax efficient and the one piece of advice I would offer to all is to open an Assurance Vie in France, also treat any financial investment advice from the two big UK "French tax specialists" with a great deal of suspicion!

Oh and if you line up 7 French tax inspectors and ask "what day of the week is it?" you can get 7 different answers, each one adamant that they are correct. Ask the same question of 7 different employees of CPAM and you may get 8 different answers.

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Indeed and I always take notice of words of wisdom though the wisdom must be tested where possible when the qualification for that opinion is unknown! What would be helpful, and I suspect not just to me, if someone could explain the amount of tax and other pocket lightening activities as a percentage of gains made say for UK Building Society interest compared with Investment Bonds UK sourced and Assurance Vies. The last point about tax inspectors seems to be sadly true hence my confusion at all the different opinions I have been getting. It is strange that officials working for the same organisation have widely different opinions on certain issues. Bit like their medical system used to be, shop around until you find an opinion you like!...........................JR 
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[quote user="JohnRoss"]Indeed and I always take notice of words of wisdom though the wisdom must be tested where possible when the qualification for that opinion is unknown! What would be helpful, and I suspect not just to me, if someone could explain the amount of tax and other pocket lightening activities as a percentage of gains made say for UK Building Society interest compared with Investment Bonds UK sourced and Assurance Vies. The last point about tax inspectors seems to be sadly true hence my confusion at all the different opinions I have been getting. It is strange that officials working for the same organisation have widely different opinions on certain issues. Bit like their medical system used to be, shop around until you find an opinion you like!...........................JR [/quote]

Hi,

       Building society interest is always taxed in full at your marginal rate and also subject to CSG ,(currently 12.1%)

       UK insurance linked bonds are, in theory, treated the same as french life assurance plans, but in practice this is difficult to obtain because UK companies do not compile the extremely complicated statistics needed to properly deal with the products.(see below)

       French Assurance Vie plans are taxed as follows;

        For contracts subscribed since 1983;( only the interest or gain element of the withdrawal is taxed--losses cannot be offset against any income) .    If you opt for the "prélevement forfaitaire":

        Contract held less than 4 yrs.............................................................35%

                              less than 8 more than 4yrs............................................15%

                           more than 8 yrs ..............................................................7.5% (after allowance of 4600€ single person, 9200€ couple)

     

       OR lower tax-payers can opt to pay at their marginal rate.

       CSG at 12.1% is always taken (at source for € funds , and at withdrawal for "multi-support funds")

     Contracts taken out between 01/01/83 and 25/09/97  are taxable only on the products acquired on premiums paid in AFTER 26/09/97.

     Contracts taken out before 01/01/83 are totally tax free even for premiums made since 26/09/97.

     

      The amounts to declare are notified to the plan  holder by the assurance company after making the necessary calculations. (so you see why it is difficult to correctly declare UK products.)

          

      

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Possibly my final post on this subject - I will be out of touch for a few days. Posting as promised. I checked again with MOH. When he went to the tax office he did explain that these were UK contracts and that we had ended them last year. The first assistant called over their foreign tax expert who arrived with a large tome and subsequently told MOH that they did not need to be entered on the forms but that we should provide details on a separate sheet in a similar way to the bank accounts but giving start and end-dates. This is what we will be doing. Mine is pre '83 anyway.
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That is interesting Lorna and in a way ties up with what Siddalls have had to say to me today in their very helpful and prompt reply.

They have made the following points having consulted their French office:

1/ Conclus, see 2042 last page box TT, does have the meaning of completing a contract but it means, in this case, contracts of insurance 'set up' abroad, rather than encashed/surrendered. Therefore details of bonds should be declared on an accompanying list.

2/ Gains on foreign life insurance policies entered in TR Section IV of form 2047 and TR section 2 page 3 of the 2042 form and therefore subject to income tax.

3/ My wife's savings plan with Teachers Assurance treated in the UK as a regular premium endowment policy operational for 15 years would have had no tax liability in the UK. For UK tax residents the policy would have been treated as having the tax liability discharged through tax deducted by the life company on the underlying fund during the life of the policy. There is no similar policy structure recognised in France.

There are two opinions on the declaration of gains on such policies in France. One is that French residents, us, should declare maturity value minus the premiums paid in box CH on the 2047 and 2042 forms provided the policy has been held for at least 6 or 8 years.

However, and this is the interesting point, the other opinion is that gains on such policies need not be declared  as under the principle of the double taxation agreement tax should not be paid twice on the same investment. It would appear that the Double Tax Treaty makes no specific reference to the maturing of UK endowment policies held by French residents. Siddalls are not authorised tax advisers and could therefore make no recommendation on this point. Any comments would be most welcome. Oh which shall I choose!.......................JR

PS On inspection we declared stuff relating to 2 above, following advice from French accountants, in VG in the early days which it would appear was wrong as this VG is for items having 18% capital gains tax. Maybe we paid too much then, cannot see the tax man complaining about that! Later on the same stuff in TS following advice from a French tax inspector, got the email to prove it so again hope no retribution! Talk about complicated. This year will do as Siddalls have advised and declare it in TR. Feeling quite twitchy now, must go and lie down in a dark room! 

PPS If a policy has no end date would the following be Ok in the extra info one lists Cette police est toujours en vigueur or Cette police d'assurances n'a aucune date de fin. 

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