Tax on Lump Sums

[BluegrassFreak]

My private pension provider will be paying me a lump sum of money. This will be taxed  at 22% in the UK prior to payment being made (despite me being a non tax payer, non-resident in the UK), and a tax payer in France.

I understand that this tax will be reclaimable, although I'm not sure yet what procedures are to be followed to reclaim this.

My questions are :  (a) Is this lump sum taxable in France and to be declared on my next Tax return ?

                             (b) If it is taxable in France, would it be more beneficial to allow the UK tax to stand and not pay tax on it in France ?

Many thanks.

[Hereford]

Why do you think it will attract 22% tax in the UK?  Normal pension Fund cash payouts (e.g. 25% of fund on post 1988 policies) are tax free in the UK.

As we understand it (but no proof) the sum would be taxable in France.  We got over this by taking a bigger pension and no lump sum on a small fund.

I am sure someone who lives in France and has taken their lump sum will know the answer - just supposing they told the French authorities...(Yes I am cynical)

H.

[cooperlola]

I was advised by my accountant that a lump sum would be taxable here, so did what Hereford did.  My o/h took his in the UK before we moved, and it was not taxed - like Hereford, I do not know where the 22% came from either - because he "earned" it before we became eligible to pay tax in France. However, this has been discussed on here recently (if you do a search, you may find it) and I am pretty sure that at least one poster believed that lump sums were not taxable here, so I'm still not convinced that I got the difinitive answer - even from a French accountant.

[allanb]

[quote user="cooperlola"]However, this has been discussed on here recently (if you do a search, you may find it) and I am pretty sure that at least one poster believed that lump sums were not taxable here...[/quote]

You're right, but I haven't found the justification for this view.  The current tax treaty says that "pensions and other similar remuneration paid in consideration of past employment" are taxable in the country of residence.  Being a pessimist by nature, I would say that this probably includes an amount paid as a lump sum unless you can find something that says that it doesn't.

I know there's a new treaty waiting for ratification but as far as I can see it uses the same language - or is there a new clause somewhere about lump-sum payments?

[AnOther]

Bill Blevins has written an article on pensions in the current issue of French Property News and touches on this aspect.

The present situation seems to be that, because the concept of tax free anything is completely alien to France, it's a grey area but it's generally accepted (not in writing) that TFLS'a are not taxable in France although (inevitably !), and I quote, "different inspectors in different regions have been known to take different views".

He goes on to say that there are rumours of a law being enacted which would allow taxation but nothing concrete.