Am I a UK or French Tax resident?

[cruddler]

Any advice on this would be massively appreciated as its been my single biggest concern over our proposed move to France. I have read through many threads on here but none quite seem to cover my circumstances so apologies in advance if Ive missed something.

We are set to move to Burgundy in mid September. My wife wont be working but I will be continuing to work for a UK company chiefly over the internet but also returning to the UK initially once a month to work in the office. I have had so much conflicting advice on who warrants my tax that I dont know who to turn to next. I was told originally that I would be a UK tax resident and consequently the amount of time I spent in England was irrelevant but at the same time I would have to declare myself for Tax as soon as I arrive in France even thought I wouldnt be paying any. I was also advised that I would possibly be in line for a Workers E106 so that my NI contributions covered my healthcare costs in France. All this kind of makes sense but I think I would feel somewhat of an imposter living in France and paying no tax to the country housing me.

Thanks in advance if anyone can help or point me in the right direction

Andy

[Bob T]

You will be a French resident and have to declare your worldwide income here, but if you have been taxed in the UK, then you won't get taxed twice.

[BJSLIV]

However if you will be intend that your arrangement of working for the UK from France for more than a year,  your company should arrange for you to pay French "NI" contributions etc.

[Will]

No, I don't agree with what Bob says. If you only return to Britain once a month that sounds as if you will be spending most of your time in France. It is where you are, physically, when you carry out the work that counts, rather than who employs you or what currency you are paid in.Your employer would need to set up a French subsidiary to pay you (very expensive and complicated if such a company does not already exist) or you would, effectively, become the French subsidiary which means you would register as self-employed in France. If you arrange things so that you spend most of your working time in Britain then you would probably count as UK tax resident, but you would also qualify as French tax resident because your main home and/or family/dependents are in France. Where you would then pay tax would be determined by the double taxation agreement (probably in Britain), but you would have to declare your income to the French taxman as well, as Bob says. Depending on how much time you spend in France you may be expected to contribute to the French social security rather than the British, which would complicate things further. 

In circumstances like yours you need to consult an accountant who understands both French and British taxation and social security. Don't rely on what you may be told on forums or in the pub. Don't even rely on what the tax offices tell you; they only understand taxation in their own countries and will not necessarily understand the position regarding the other country or the social security implications.

If this is only a short term arrangement then you may be able to work in France on an E101 form which will allow you to continue to be taxed, and pay NI, in Britain, but join the French health system. This will normally only be possible for a maximum of two years, and is not an option that is available to you if your move to France is permanent.

I have been there myself so I can speak with some experience though I would not pretend to be qualified to advise others.

Getting it wrong could prove very costly and aggravating.

[woolybanana (ex tag)]

Find out the most advantageous story and stick to it! Even if it means bending the truth a little. But whatever you say and do must be provable.

(Now I will hide in the bunker as the usual suspects throw cowpats)

[Russethouse]

I don't know about 'usual suspects' but these people are starting a new life in France, the best thing is to get proper professional advice, not start trying to prove 'advantageous' stories to save a few pounds. Really!

[woolybanana (ex tag)]

RH, of course what you say is strictly right (oooohhh strict dear) but there are versions of the truth which can be adopted. Eg. How many days were you in say France last year? Where is your principal residence? All I am saying is that YOU should take the initiative and answer these questions to your advantage before some nasty little fonctionnaire does it for you.

Rule of life: always know the implications of an an answer to a question before you give it. Corollary: Tailor your answers to suit your best interests.

Did you never live in the Middle East?

A few pounds could be thousands dear.

[Russethouse]

The trouble is that the taxman can rapidly find out just how many days you were in the Uk or France. Val2 who posts here once had a discussion with the taxman and he had a note of exactly what sailings she had been on and when stretching back several years.

Where is your principal residence ? - the taxman will decide, all you have to know is the guidelines and act accordingly, not act one way and tie yourself in knots trying to prove something that isn't true.

I think the days of scope for being economical with the truth in these matters, have long gone

 

[woolybanana (ex tag)]

RH, I used the word 'tailor' which means, I hope, be able to back up your answers. What you do not have to do is accept the taxman's version as gospel? I could say more but this is so pubic.

(I spilt on my keyboard the other night and it wont do 'l' after 'b'. Plophetic I feel.

[Tony F Dordogne]

Back to the OP - Cruddler, as Will says, see a good accountant who has experience of dealing in French and English tax matters, get advice IN WRITING in case there's a query in the future and follow the accountants advice.

Tailoring the truth - evading and avoiding giving information which may be to you short term advantage - may have a long term financial impact on your life style and whilst you may save money, do you really want the hasle of having to deal with a picky French tax person at some stage in the future?

[Gluestick]

Cruddler:

Some people can self-select their residency. Domicile, however, is a wholly different matter and here does not concern you.

The simple fact is that both the French and the UK tax authorities will seek to insist that you are resident in their jurisdiction!

Normally, professional advisers act to convince these authorities of a specific position.

However, in your case it would appear that you will be captured by both HMRC and the French fiscal office.

In order to be considered "Non Resident" by HMRC, you must be able to conform to certain specifics and more critically, be able to prove that these circumstances persist.

As has already been stated, if your employers were to establish a corporate presence in France, then they could employ you under French employed regulations: hugely expensive and, of course, punitive cotisations. Your periodic visits back to the UK would not matter.

From a net position in any case, you will only, in theory be likely to be taxed in one jurisdiction, since the Double Taxation Treaty comes into play. That said, HMRC will tax you under Schedule E, or PAYE, if you like, since your employer will be based in the UK.

Your employer is in the UK: you will be regularly working in their offices in the UK: their tax base is the UK. Ergo, you are employed in the UK. You will be also liable for Employee's NIC: as will your employer be liable for Employer's NIC.

Alternatively, if your employer agrees (few would!), you could contract your services from French Self Employment and thereafter be totally based in France, fiscally.

Health Cover is another and different matter!

As has already been firmly suggested, seek apposite professional advice, from either British or French accountants, fully conversant with cross-border taxation, since, not only will they be able to analyse your whole situation and circumstances correctly, but will be able to first suggest your optimal route and second, take on the task of dealing with the fiscal authorities in both states.

Whilst the "Jack the lads" in parts of France believe they can avoid being eventually caught by the fiscal offices, increasing levels of EU tax harmonisation and co-operation mean that data is regularly exchanged.

To consider these bureaucrats as bumbling, innefective and stupid, is not only supreme self-delusion and sublimely arrogant, it is blind idiocy, too.

Get it right up front and then relax!

Bonne Chance !

 

 

[cruddler]

Thank you all for taking the time to share your knowledge and opinions and apologies for not being able to reply sooner.

Having lived and worked in the UK all my life I am of course used to our tax regime and the amount deducted from my pay each month. With our move to France (which is permament hopefully by the way), it would of course be great if my salary came under the French Income Tax regime as from what I have learnt being taxed as a family would mean we would be better off but our move was never about that or influenced by that. I am a bit concerned though about being worse off. If I am paying UK income tax and NI, would France's various habitisation taxes mean that I could actually be 'taking home' less a month? Whats more if I cannot convince the authorities that I am eligible for a worker's E106, will we as a family then end up paying yet more in healthcare subsidies?

I am on your advice, going to be talking with a french tax specialist next week so hopefully my position will become clearer and I will try and post here what I learn

 

[Victor Meldrew]

My understanding is as follows:

If you live in a country for more than 183 days a year then that is your counrty of residence, and therefore is deemed to be where you pay your taxes. However, we have a friend here who has an accountancy business in the UK and returns there twice a month for two days at a time. When he went to the impots here to register for tax, they said that as far as they were concerned if his business was still in the UK then that was where he should pay his taxes.

Is this just a case of we cannot be bothered, so go away any bother someone else?

Victor  

[johndalton36]

It can not be the case that someone who is paying PAYE in the UK can be taxed again in France on their PAYE income, because there are dual tax agreements in place to prevent this from happening. If you live in France full time then you will have to complete a French tax return declaring your UK income, along with any income or investments you hold in France (or elsewhere) but you will not have to pay any additional tax in France on your tax paid PAYE income from the UK.

You are employed by a UK employer, who is at liberty to employ people resident anywhere in the EU, and if the employer is not actually trading in France they have no obligation to set up a subsiduary in France or indeed to register to trade here.

You can probably go to half a dozen different accountants who specialise in French and UK tax law, be they in France or the UK for advice, each of which will likely give you different advice entirely - but almost all will give you advice that is likely to ensure you have little choice but to remain a customer for years to come!

The 6 month rule only applies to domiciliation and not tax residency - we are in the EU now! If it did apply to tax residency then international lorry drivers would have a terrible problem proving where they reside and where they should pay tax!

Whether you would want to continue to contribute to the UK coffers is of course another matter altogether.

[LEO]

[quote user="johndalton36"]

It can not be the case that someone who is paying PAYE in the UK can be taxed again in France on their PAYE income, because there are dual tax agreements in place to prevent this from happening. If you live in France full time then you will have to complete a French tax return declaring your UK income, along with any income or investments you hold in France (or elsewhere) but you will not have to pay any additional tax in France on your tax paid PAYE income from the UK.

You are employed by a UK employer, who is at liberty to employ people resident anywhere in the EU, and if the employer is not actually trading in France they have no obligation to set up a subsiduary in France or indeed to register to trade here.

You can probably go to half a dozen different accountants who specialise in French and UK tax law, be they in France or the UK for advice, each of which will likely give you different advice entirely - but almost all will give you advice that is likely to ensure you have little choice but to remain a customer for years to come!

The 6 month rule only applies to domiciliation and not tax residency - we are in the EU now! If it did apply to tax residency then international lorry drivers would have a terrible problem proving where they reside and where they should pay tax!

Whether you would want to continue to contribute to the UK coffers is of course another matter altogether.

[/quote]

Hi John,

Nice to hear someone speak their mind,and , no spelling mistakes to boot!

[BJSLIV]

but I will be continuing to work for a UK company chiefly over the internet

 if the employer is not actually trading in France

But the will be employing someone to perform work in France. Hence trading.

Now whether anyone would  be  / has ever been caught in this situation is another question.

But its not one of law, but risk management.

 

[Will]

I can assure you, from personal experience, that as BJSLIV says, if one is actually working in France for a non-French employer, regardless of whether the employer 'trades' in France, one is liable for tax and social contributions in France. This is set out, as far as I am aware, by the double taxation agreement, and has been confirmed by both French and British accountants and tax inspectors in both countries. Of course, there are grey areas as you can be on 'temporary assignment' or only performing a small part of your work when in France, so you may well get away with being taxed elsewhere when permanently residing and working in France, but...

[Ian]

I am pretty sure Will is spot on with his/her advice.  For once the "grey" areas are fairly limited.  Interesting thread!

[Nick Trollope]

And there are some who seem to delight in giving false and misleading information. This subject has been done to death on this and other forums and their contributions add nothing, other than to muddy the waters.

We, who know these things, know these things through hard-learnt experience (and sometimes because we are qualified, too).

 

[woolybanana]

I feel you might have been having a swipe at me on that one Nick. Ok, then let me give you an example: It may be beneficial to choose the date you move from one country very carefully in order to gain the greatest advantage to yourself. That is what I mean by understanding the implications of your answers to questions and adapting them to suit yourself.

Example: When I first started working abroad, many many years ago, remittances to UK were taxed regardless of where they came from in the year in which they were earned. However if you placed your money in the Channel Islands until the next financial year (which need only be one day), then they were not taxable. And this was legal, the tax office told us so. So, those people who did not bother to adapt their circumstances ended up paying extra tax.

And what pray is wrong with that approach. Your trite "false and misleading" might now be withdrawn with a little apology because you did not understand what I was talking about, despite being qualified?

 

[cruddler]

Hi all and thank you again for taking the time to contribute. Apologies for bumping this thread but I am now in France and so I thought I would try and bring you up to date with what I have established.

I sought advice in the UK from a Tax specialist and was advised that I would continue to pay contributions to the UK and to apply for a Workers E106 to cover my healthcare contributions in France.

I have since phoned the International tax dept of the DWP and have now been advised that I would only be taxed by the UK on the time I work in the UK; for example one week a month meaning only 12/52 of my income would be taxed by the UK. There is then every chance that this could fall below the taxable threshold and therefore my actual liability to the UK would be zero. The French Government would tax me on the remainder if I did contribute to the UK (although they would try to tax me on all), or on all if my contributions to the UK were zero.

This is outlined in Section 27 of ITEPA

http://www.hmrc.gov.uk/manuals/eimanual/EIM77020.htm

I also need to inform my employer and get them to notify the tax office that I am only to be taxed on 12/52 of my earnings as outlined in

Section 690 ITEPA

http://www.hmrc.gov.uk/manuals/epmanual/ep8078.htm

http://www.hmrc.gov.uk/manuals/epmanual/ep8095.htm

I then spoke to the National Insurance Office and they agreed saying I would be classified as a Distance Worker and my NI contributions to the UK would cease meaning E106s would be irrelevant and that I am simply to declare myself to the French authorities and pay NI as any other normal french resident would, although I must also get an E101 (should that be E111) from the French Government to take with me every time I return to England.

As far as I can gather being taxed in this way should mean as a family we pay less tax I hope because of the income divided by parts set up. Is this right? Although I am already dreading the Self Assesment forms I am going to have to fill in for both countries :-|

[Will]

Yes, you will probably pay less tax. But do be aware that French cotisations are far higher than English NI contributions.

[Panda]

Hi Crudler

You also don't mention how you will be paying tax in France, are you to become an independent (self employed) worker, if not surely your company would now have to agree to pay French employers NI which is VERY high and something most employers refuse to do not just for cost reasons but there is the admin involved.

What are your plans on that front?

Panda

[cruddler]

I really dont know how to answer that Panda. Im still trying to get my head round this lark and constantly being giving different advice on the matter from those in the UK is hardly helping. When you saying paying Tax, I take it you mean Income Tax? If so isnt that done via the yearly self assesment rather than at source?

With regards to NI/cotisations and them being contributed by my employer I havent the faintest idea on the mechanics of that nor am I aware of the level of contributions...I did up until a few hours ago expect to be paying my NI and Tax to the UK afterall so any elaboration on what to expect would be appreciated

Andy

[Panda]

Hi

Well I'm no expert but I can't see that you can be employed by a someone as a salaried employee without them having to pay NI equivalent in France if you are expecting to pay NI equivalent yourself.  I guess my question is, are you stating your self as employed or self employed, it makes a big difference.  Someone posted a couple of weeks back about their employer not being prepared to pay the high level of cotistations required as an employer in France.  Your problem is that if you are still recognised as an employee in the UK being anything else in France would be hard to pass off.

For my own part I am self employed as a contractor in similar circumstances and pay about the same in cotisations and tax together as I did in the UK.  The UK government actually refused the tax I paid there in year one and returned it all to me, even though I was orignially recognised as a remote employee.  I am now set up as a micro-bic, invoice my various contracts gross and pay tax and cotisations myself here. 

It's all confusing isn't it!

Panda