interest confusion - 2042 v. 2047

[chessfou]

I was certain that UK bank interest should be entered (grossed up) at TS on p3 of 2042.

I was also certain that UK bank interest should be entered in table 2B of 2047.

But now I seem to be in a Catch22:

I enter the gross figure (in €) in TS on p3 of 2042

- table 2B of 2047, column 5 asks for the Net figure in € (no problem so far) but then

- table 2B of 2047, columns 6 & 7 should apparently be left blank? Because there is no "pourcentage a appliquer" given in the "tableau ci-contre" (only note 8, which doesn't seem all that relevant), so

- I seem to be left with a total Net interest figure in "A" (still table 2B of 2047, where figures are to be totalled) and nothing to go in "C" which then means that the Total on the line below (to be transferred to TS on p3 of 2042) is a Net figure and doesn't balance.

Anyone know what I have missed or where I am going wrong, please?

At least the deadline is far away ... [:)]

[Ron Avery]

It is my understanding that if you are only declaring UK bank interest you don't put anything in section 2.  That is for overseas rental income covered by tax agreements and income calculated from the tables, which are not applicable to you.

[Crevette]

If you get this paid gross, shouldn't you simply add it to your income figure?

-Rob-

[Sunday Driver]

The 2047 table asks for the amount of interest net of tax paid, together with the associated tax credits due under the applicable convention .  As there is no convention with the UK, you declare the gross figure in the 2047 table.  You then transfer this gross amount directly to box TS.

 

 

 

[allanb]

[quote]As there is no convention with the UK ...[/quote]?

I think your conclusion is right, SD, but there is a France/UK convention, and interest is dealt with in Article 11.  If a French resident receives UK interest, it is taxable in France, which means it should be paid gross, and it doesn't give rise to a tax credit - this is confirmed by note 8, which is referenced in the "intérêts" column in the table of countries in form 2047.

Assuming that Chessfou is resident in France, and received the interest without deduction of UK tax, I don't think there's a problem.

If UK tax was deducted, I presume he can claim repayment through HMRC - but I don't believe this would affect his French tax return.   I think it's still the gross amount that should be reported in the table in 2B; as far as France is concerned, the "net amount received" includes the tax repayment, which is really only a correction.

[Ron Avery]

"If you get this paid gross, shouldn't you simply add it to your income figure?"

In a word, NO.

 This sort of well meant advice going the rounds,  normally from the English bloke been here years up the bar, really pisses me off.  What is it about some normally honest people that as soon as they come to France they want to avoid paying any type of tax or social charge that they can[:@] Who do they think should pay,  the French?  Just this week three peoople I know at French classes who have all been here 5 + years in a discussion about late URSSAF payments openly admitted that they do not really live here YET......... and pay no tax or health care contributions.[:@]

What this would mean Rob, is that you whilst you are technically "declaring your total income" you are avoiding paying any social charges on the unearned part that should go into box TS, so if you are caught then you say that its a mistake. Not as bad as the twonk who advised a friend to claim tax relief for two non existant kids "as the French never check up".  What planet are these people on??

[cooperlola]

Ron, don't get me started!  I had lunch with an English couple the other day.  There were 3 other couples there, all Brits; all have lived here as long or longer than us.  We are the only ones paying tax here.  It makes my blood boil - I say so, but it's like talking to a brick wall.  The problem is that the couple who have been here the longest, openly advise the others that "they don't need to bother" filling in any tax forms here, if they carry on paying some sort of tax in the UK.  But they'd all ring the French police if they were robbed; they drive on the roads here and make use of all the facilities as if they were entitled.  All have UK registered cars, insured through goodness knows what address back in England. It's outrageous.

[allanb]

Could some of these be the same people who complain indignantly about immigrants from Rumania not paying tax in the UK?

[chessfou]

Thanks allanb et.al. but much of the "received wisdom" of the thread is wrong (at least according to the Hotel des Impots in Rodez, where I spent the best part of an hour with the "Patron"* on Friday morning). [*best to speak to the head man, if possible]

Probably the single most important thing I learned from the meeting was to ignore form 2042 until having completed form 2047, only then tackle form 2042 (and 2042C, transferring the relevant figures as indicated by form 2047).

We start with form 2047 (so, nothing entered in 2042 yet) and I doubt very much that you will follow this unless you have a copy of form 2047 in front of you (a small download from www.impots.gouv.fr):

In our case, we stick our pensions (private) into I on page 1 of 2047 (and, as it tells us to do there, on form 2042),

We then move on to section IV.2.A and deal with the dividends and, having transferred the relevant figures from here to DC (form 2042) and TA (form 2042C), then

to Section IV.2.B for the interest on our UK bank and savings accounts ("offshore" accounts would be dealt with the same way, I believe) which we should enter as follows:

Col.1 "Royaume-Uni" (or "Grande Bretagne)

Col 5 "xxx" being the total amount of interest received by us (net of any taxes withheld inc. EU withholding tax)

Col 6 "0"

Col 7 "0"

A       "xxx" i.e. "Total des Revenus" (cols 2+5+8 - in our case, interest only, col 5)

B       "0"

C      "0"

sums "xxx" and this is the amount that goes to box TS on form 2042

(in our case nothing more for lines CA, TA or BG)

[allanb]

Chessfou: you don't actually say whether tax was deducted from your UK interest; if it wasn't, then there is no question about how to declare it in France - what you said is the same as what SD said and what I said.

However, if UK tax was deducted, there's a very interesting situation.  Bear with me:

Suppose that you and I both earn £100 in interest from a UK bank.  Suppose that you have done the right thing and informed your bank that you are resident in France: your bank will do its duty and pay the interest without any withholding, so you will receive £100.

But suppose that I have failed to inform my bank about my residence, and they pay me the interest after deducting withholding tax of £20 (I don't know what the actual rate is, but it doesn't matter).  So the immediate payment I get is only £80.

Now as a non-resident, I have the right to claim repayment of the £20, which shouldn't have been deducted in the first place.  Here is how HMRC puts it (in leaflet PD5):

"Interest can be paid to you with no UK tax deducted.  Any UK tax that has been deducted can be repaid to you in full."

So let's suppose I make the claim and get my £20 back from HMRC.  Now you and I have each received £100 in interest; our incomes are identical except that I had to wait a bit to get part of mine.

However, if your friend in Rodez is right, I can correctly declare only £80 as taxable interest in France, whereas you will have to declare £100 and pay tax on it.  

Perhaps I'll get away with it, but it doesn't make sense and I don't believe it's correct.  May I suggest that in your discussion with the tax office, the distinction wasn't made clearly between a tax credit (which is a recognised way of avoiding double taxation) and a tax repayment (which is the correction of an error)?

Don't get me wrong.  If you can find a way of reducing your taxable income, with the approval of your tax inspector, go for it.

[chessfou]

How can one interpret "montant net encaissé" any other way?

[quote]May I suggest that in your discussion with the tax office, the

distinction wasn't made clearly between a tax credit (which is a

recognised way of avoiding double taxation) and a tax repayment (which

is the correction of an error)?[allanb] [/quote]

Hmm, well no; that was pretty much his point why it was done this way. Although your example does make me wonder. (Are we missing some subtlety here about which bits are subjected not just to French tax but also to CRDS? Not to mention the significance of those "credits impots" when they do apply).

The one thing I do know is that my head always hurts whenever I fill in a tax or VAT return/form anywhere in the world (especially in Russia, Spain and, above all, USA).

[chessfou]

[quote]However, if your friend in Rodez is right, I can correctly declare only

£80 as taxable interest in France, whereas you will have to declare

£100 and pay tax on it.  [allanb][/quote]

No, surely you declare £80 and, as, when and if you get the £20 back, then you must declare that as well (since it adds to the "montant net encaissé" figure).

[Ron Avery]

Chessfou

I went to Villefranche de Rge and what they told me about completing the 2047 is different to what Rodez have told you.  However, the layout of the 2047 has changed in the last two years and it appears that now section 2 has some relevance whereas before it semed section 1 was all that it was necessary to complete.

You can actually enter your interest in box TS in section 1 or box TS in 2b on the 2047, there is no calculation to do although section 2b is probably the correct section, but as long as the amount goes into box TS on the 2042 it really does not matter.

As AllanB says you declare the amount gross not net, net amounts only apply if you have paid tax in another country and cannot claim it back.  if you have paid UK tax on your interest because your bank will not pay it gross (many will not and if pressed will tell you to close the account as you np longer live in the UK) then you simply claim it back by doing a UK tax return if your total UK income not taxed in France is less than your freepay. You do not and cannot declare it as and when you get the tax back.

[chessfou]

[quote]You can actually enter your interest in box TS in section 1 or box TS in 2b on the 2047,[RonAvery][/quote]

No, sorry, it has to be both and you have to start in the right place.

You start with form 2047 (not 2042) and, having done so, then transfer the relevant amounts to the relevant boxes (on 2042 and/or 2042C) - that is why they use those little right-pointing triangular arrows and follow up with the specific wording (e.g. at the end of Section IV.2.B of form 2047):

Chacun des montants TS, CA, TA et BG est a reporter sur la declaration des revenus (2 lignes TS, CA et BG; et 8 ligne TA).

My bold - i.e. Form 2042 (and, if necessary, 2042C).

It clearly makes sense. Take a look at 2042 - there are no directions to follow (e.g. now enter this on 2047).

[quote]As AllanB says you declare the amount gross not net, net

amounts only apply if you have paid tax in another country and cannot

claim it back. [RonAvery][/quote]

Well, that's absolutely NOT what the form says. It states quite clearly (which is also what "yer man" told me):

- enter the montant net encaissé in column 5

- enter the % a appliquer in col 6 (consult the table - the table says 0)

- enter col 5xcol 6 in col 7

- proceed to A

- then B

- then C (which, out of interest, is a line for receipts from countries without a double taxation agreement)

- sum A+B+C which gives the figure to go to TS.

[allanb]

[quote user="chessfou"]No, surely you declare £80 and, as, when and if you get the £20 back, then you must declare that as well (since it adds to the "montant net encaissé" figure).[/quote]I agree that you might be justified in not declaring it until you receive it*, which might be in a different tax year.  However, whether it's in the same year or not, the £20 in my example is really part of the income taxable in France.

In answer to your other comment, I do think that montant net encaissé is somewhat ambiguous.  I believe it must mean "net of tax credit", since tax credits are one of the things dealt with in that section.  I think it could also mean "net of the expenses of receiving it", e.g. exchange commission.  But (as I've said) I don't think it can mean "net of any amount deducted in error" - which is what tax withheld in the UK would be in these circumstances.

Edited to add PS:

*On the question of when you have to declare it, I see that Ron cast doubt on this in an earlier post ("You do not and cannot declare it as and when you get the tax back.")  Do you mean that if you know the UK tax is repayable, you must declare it in the same year?  I can't argue with that.

[cooperlola]

[quote user="chessfou"][quote]However, if your friend in Rodez is right, I can correctly declare only £80 as taxable interest in France, whereas you will have to declare £100 and pay tax on it.  [allanb][/quote]

No, surely you declare £80 and, as, when and if you get the £20 back, then you must declare that as well (since it adds to the "montant net encaissé" figure).
[/quote]This is the way my (French) accountant interprets this.  Then if the rebate comes back at a later time, you declare it then.  I got a bit shirty with her when I discovered I'd only paid tax on the net amount last year but she was quite clear about it.  "You pay the tax when the UK tax office comes up with your rebate, you are not obliged to pay it until then."

[Sunday Driver]

Blimey. I go out for the day and there's 14 posts added to this thread....

 

[cooperlola]

[quote user="Sunday Driver"]

Blimey. I go out for the day and there's 14 posts added to this thread....

 

[/quote]You can't leave the kids on their own for a moment..

[chessfou]

[quote]In answer to your other comment, I do think that montant net encaissé is somewhat ambiguous.[allanb][/quote]

Really? Note 5 (2047NOT) seems 100% clear to me; I quote (leaving out the bit about USAians):

- dans tous les cas, dans les colonnes 2, 5 ou 8 (selon la nature des produits encaissés) des tableaux 2-A et 2-B, le montant net de ces revenus, déduction faite de l'impot étranger. [my bold and remember that col 5 is the one for interest]

How can that be interpreted to mean "Gross, including any tax deducted"?

Also, if "montant net encaissé" didn't mean what it appears to, then you would presumably be putting the grossed up figure (dividend + tax credit) in column 2 of 2-A for dividends (which would clearly be a nonsense since, having included the 11% tax credit in that figure, you would then be adding it a second time as per columns 3 and 4).

[chessfou]

Sorry, as if this thread was not complicated enough, I left out the first para of note 5, so here it is again (apologies for lack of accents other than acute), complete:

5. Les <<revenus des valeurs mobilieres étrangeres et revenus assimilés>> ouvrent droit dans certains cas, et notamment en application des conventions internationales conclues par la France, a un crédit d'impot destiné a tenir compte du prélevement effectué a la source a l'étranger. En conséquence vous devez porter:

- dans tous les cas, dans les colonnes 2, 5 ou 8 (selon la nature des

produits encaissés) des tableaux 2-A et 2-B, le montant net de ces

revenus, déduction faite de l'impot étranger. [my bold and remember that col 5 is the one for interest]

[allanb]

Your example illustrates perfectly why montant net encaissé is ambiguous.  Think about the phrase déduction faite de l'impôt étranger.  The impôt étranger could mean -

(1)  the tax correctly deducted (or deemed to have been deducted) which gives rise to a French tax credit under the double taxation convention;

or -

(2) tax withheld by the paying bank which should not have been withheld, and which can be reclaimed from HMRC to correct the error.  

I maintain that it means (1) and not (2).  You may disagree, but surely you can see that there is a fundamental difference.  If what has happened is (2), then the deduction emphatically does not "ouvrir droit à un crédit d'impôt..." (etc).

[milkeybar kid]

[I]Maybe our eg from accountant in Bergerac might help. He is French and helps a number of English in the area. This is for money held offshore. Form 2047 page2 B column1 he writes Isle of Man.In 2,3,4, he leaves blank. In column 5 he writes the figure in Euros after withholding tax has been taken out this figure also went on figure A+. In column 6 he chose (see chart on form 2047) Directive Espargne and wrote 18 (%) . Column 7 he wrote the exact withholding tax amount also in figure B+.  He added these A & B in the TS  then in the BG he wrote the withholding tax figure . All were transferred to corrosponding on form 2042K. Now we are off to  TT you wont find that on a Tax Form, only in IOM!!brumm brumm[Www]

[Ron Avery]

Allanb I think there is a degree of hair splitting here by Chessfou,  and I agree with your intepretaion of the notes.  I wonder why Chessfou is so determined that his/her method of completing the 2047 is correct when at the end of the day it all goes from boxes TS on the 2047 to box TS on the 2042,  and three different tax offices have given different ways of getting it there[:'(].

The milky bar kid's example is a good one to demonstrate the difference between tax that is paid but not recoverable as in the case of off shore accounts where the net figure is recorded and tax that has been paid in the UK that is recoverable, as in the case of interest on UK savings accounts where the gross ie the amount received, should be recorded.  If you choose not to pay the tax deducted in 2005 - 06 on your 2007 French return,  until you get it back from the UK,  you will pay it in 2008 when it could put you in a higher tax band or the rate of tax may have gone up, so you pay your money and take your choice so to speak, I prefer to pay the tax on the gross amount each year and get it out of the way.

One last point, Chessfou, If you do not receive savings interest or rent generated in France you clearly do not complete box TS in section 1 do you? 

[cooperlola]

I agree Ron (I say that a lot!).  I was annoyed that my accountant (who did our tax returns for the first couple of years because I was concerned that I didn't get it wrong initially) declared the net amount.  She did the same with our pensions, so that this year, now we've come out of the UK tax system, we've had to declare the tax rebate which we got from HMG due to the changeover.  For simplicity's sake, on balance just declaring gross amounts seems the way to go to me.  It will even itself out in the end.  Although neither method is fraudulent so I guess you do whichever you feel works out best for you.

[chessfou]

[quote]One last point, Chessfou,

If you do not receive savings interest or rent generated in France you

clearly do not complete box TS in section 1 do you? [RonAvery][/quote]

Sorry, you have totally lost me. There is no box TS in "section 1."

Box TS is in section 2, p.3 of form 2042.

I do, indeed, have to complete box TS (section 2, p.3., form 2042) as directed by form 2047 and the notes thereto (2047NOT).