Capital Gains / Tax

[searcher30]

situation:

- if someone makes themselves a french resident

-  rents out their uk house which only just covers their uk mortgage and has no other uk income

- makes their french property their main residence (where they live)

- has another french property which their mum lives in and does not pay rent

 

questions:

1) if mum wants to sell the house capital gains tax would be how much exactly seeing as the owner already has another property in france? would this be considered maison secondaire so capital gains would be taxed at 16%?

is there another more efficient way of doing this? the property is owned for over 5 years too

 

2) a) i imagine just like in the uk they do not need to pay tax on the uk property income unless this generates an income?

    b) if they sell their uk house when the mortgage penalty runs out (which is why they would sell after this runs) how does it work for capital gains under the french tax system?

 

thanks in advance.

[Patf]

I can only answer part of your question about renting out your uk

house. You contact the Inland Revenue and ask for a self employed form

with the section Land and Properties. You declare the whole amount of

rent received. You used to be able to claim as an allowance interest

paid on the mortgage but I think this has stopped now. Deduct any other

allowances - repairs etc - then pay tax on what is left minus your

personal allowance. If you have no other uk income tax due shouldn't be

too much, but it's definitely payable in UK. If you use an agent the

system is different. They are obliged to deduct 24% (?) from the rent

and pass it over to the IR. If this is too much it's up to you to ask

for it to be paid back. Pat. ps you are supposed to inform your

mortgage provider and building insurance people that you are goint to

rent out.

[Will]

Question 1 - Capital gains tax will be payable at 16% on the profit (i.e. the difference between buying and selling price, allowing for agency and legal fees). As you have owned for more than five years, the notaire can deduct a standard percentage from the tax liability to cover repairs and renovations - if you have acceptable French TVA receipts for such works you can use these instead  if they represent a greater expenditure - and also will deduct 10% of the capital gains tax liability for each year of ownership beyond five years. As you are a French resident you will also pay CRDS, CSG etc which amounts to an extra 11%.

[RichardA]

[quote user="Patf"]I can only answer part of your question about renting out your uk house. You contact the Inland Revenue and ask for a self employed form with the section Land and Properties. You declare the whole amount of rent received. You used to be able to claim as an allowance interest paid on the mortgage but I think this has stopped now. Deduct any other allowances - repairs etc - then pay tax on what is left minus your personal allowance.[/quote]

Just to correct this info, I'm 99% sure in the UK you can deduct interest paid on the loan. If you have a repayment mortgage, any capital part of your mortgage payment is not allowable, but the interest element is. That's why having an interest only mortgage is simpler, and the larger it is the more tax efficient it is!

By the way - I'm still looking for the correct way to declare my UK rental income on my French tax return! [8-)]

Richard

[fulcrum]

[quote user="Will "]

- if you have acceptable French TVA receipts for such works you can use these instead -

[/quote]

I made a mistake when I had my roof replaced and paid the contractor using a copy of his DEVIS not realising it wasn't an invoice. The DEVIS looked just like a TVA invoice as far as the figures were concerned. It only came to light when I presented it to my notaire for the CGT calculations. She kindly pointed out that she was unable to consider it but fortunately  the standard allowance covered the roof repairs.

Moral is. Make sure the piece of paper that you pay the contractor with says FACTURE and not DEVIS.

[Patf]

Richard - youare right, an allowance can still be made for interest on

a mortgage. I've checked recently . The french form you need is 2044,

which has spaces for the various allowances similar to uk. Pat.

[RichardA]

Pat,

I'm getting conflicting advice...  My house is in the UK and therefore taxed in the UK. I have been told by a french tax office to declare it in section VII of form 2047 (revenues exempt in France but to take into account etc). They made no mention of form 2044. Do I need to do form 2044 as well even for a UK property??

Richard

[adrianpmills]

Richard - the advice you received from the french tax office is correct.  The income is taxable in the UK and is only taken into consideration by the french tax people for calculating the rate you pay on your income subject to french tax.  Therefore you do not need form 2044.

[Patf]

Form 2044 does look as though it applies to rentals in France. The man

that helped me in the tax office here said to fill it in, so perhaps he

was wrong. The tax is paid in UK. Pat.

[RichardA]

Thanks for the replies - I'll just add the UK rental details to form 2047 only then. If they want a 2044 at my local tax office then I'm sure they'll ask for one. [Www]

Richard

[Ormx]

Hi, I'm interested in the 2nd part of searcher30's question: 

 

"if they sell their uk house when the mortgage penalty runs out (which is why they would sell after this runs) how does it work for capital gains under the french tax system?"

 

we are also resident in France for 2 years but are only now selling house in Ireland. we will already be paying Irish CGT, but I've heard there's no doubletaxation agreement in relation to cgt between the 2 countries. does this mean we'll have to pay a French cgt as well and if so  ..... how much????