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Unsold UK house and potential CGT


Chuck&Betty
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Apologies in advance if this has already been posted and replied to.

We moved to our French house (bought Nov. 2003) in October 2004 and have (hopefully) correctly notified CMU ., etc  to declare our being here and we will be due to file our 2005 French Tax year return soon.

We have been living mainly on savings plus a small amount of interest earned with the plan being to re-invest the lump sum from the proceeds of the sale of UK house to generate a more substantial income stream. Given the current market in the UK, the house still  hasn't sold.

Questions:

If our house is sold in the UK whilst we are resident in  France will we be liable to French CGT on the gain (we bought it in 1997 and the gain is substantial) ?.

We are also considering returning to the UK (and to work) in March 2006 as we cannot afford to let our savings deplete too much,  plus we feel the house may well sell better whilst we are in residence. How would this affect the French tax situation, if say, we had to stay in the UK for a protracted period ?.

Needless to say we dont want to return to the UK., as we love this part of France (Montaubon) and the house repairs here are moving on well.

Thanks in advance for replies,

Colin.

 

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Colin, you were right in thinking that this may have been discussed before (no apology needed though).  You could try reading through this  http://www.completefrance.com/cs/forums/585657/ShowPost.aspx  as I think it covers your questions.

If you do return to the UK to work and to sell your house I think you might well compromise your status as non-UK residents, although the current wording of the new UK France double tax treaty does not make it clear  [*-)]  You can have a look at the document if you like, it may help  http://www.sykesanderson.com/articles/tax_treaty.htm

Or you might like to read this http://www.frenchentree.com/fe-legal/DisplayArticle.asp?ID=842 as it contains the same facts, but in much more understandable, condensed fashion.

In the end though, it would pay to take proffessional advice, especially as there is a substantial sum involved.

Hope this helps

 

 

 

 

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Under the current UK France tax treaty the gain on sale of a UK property for a resident in France is taxable in the UK - not in France.  There is a new treaty awaiting ratification, which alters the position, but this is unlikely to come into force (2007 at the earliest) before you sell your house.

If you remain non-UK resident for at least five years after leaving, then there will be no UK liability to CGT.

If you return to the UK within five years of leaving (as a resident rather than a visitor) then the sale of your UK house will attract a capital gains tax liability for the period of ownership during which it has not been your main residence.  This gain crystallises on your return to the UK (if within five years).  However, the final three years of ownership are not counted towards the secondary residence period. Therefore if you sell your house within three years of leaving then, presuming your house was always your main residence prior to moving to France, you will have no CGT liability. 

It looks like you will be fine.  If there is a capital gain there are reliefs available to offset, but I will only go into these if you need me to.

 

 

 

 

    

 

 

 

 

 

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  • 3 weeks later...

Thanks both for your replies, sorry but Xmas cheer delays. Please call us if you are in our area or closeby (Lafrancaise) happy to see you and perhaps enjoy a glass of wine (or two).

We are asking our solicitor in the UK (french specialist) to take a view as to the situation when the treaty takes effect, if any news as to when it will pass into law in each country and the actual effect on us IF our UK house is still unsold  (horrors) at that time.

Depending what comes up, may well post further message on Forum.

 

Happy New Year

C&J

 

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