tax on civil service pension lump sums

[Edgarj]

Has any of the many public sector employees now in France have experience of the tax treatment of the tax-free( in England) lump sum element of the pension. I have been told that not only is this taxable in France but is assumed to be the income for a single period so is taxed at the highest applicable marginal rate. This is a hefty chunk; please can someone say it isn't true?

[Dreamers]

I took my 'lump sum' prior to moving to France so cannot comment specifically on that, however as I understand it any Government or Local authority pension can only be taxed in the UK. This was confirmed to me by the Inland Revenue, there is no choice as to where it is taxed. As the lump sum usually forms part of the pension , ie  amount of the lump sum is determined by how much of the pension is 'commuted' , then I do not believe that it can be liable to french tax atall.

[Moulin Neuf]

We are in the same boat - tax free commutation of pension (in UK) but since arriving in France.  Can anyone advise.

Jan

[Penny29]

Hi,

I've just recieved my civl service lump sum too - it had already been taxed in the UK, so as I understand it (as an ex-UK taxman!!!) it is not taxable in France. However, if you can hang on a couple of weeks I will double check with my newest French friend (who just happens to be a tax inspector too!!!) when I next meet up with her for a drink.

 

[Redcap]

Hi,

I seem to recall reading in a book (David Hampshire?) that if a person is resident in France and receives a lump sum from the pension it could be taxed by the French. This is something to do with them not having such a thing as a tax free commutation in France.  It was suggested that you make sure you take the commutation prior to becoming a French resident, though how you can become a French resident before retiring and getting your lump sum, I don't know.  In under 4 weeks, I will be in the same boat!

Regards,

Bob

[isabelmaidment]

My reading of the legislation is that pensions which are funded by the governments of either country on a pay as you go basis such as for instance the Fire Service are not taxable in the other country. Pensions which are have funds held outside Government control are taxable in your country oif residence / centre of fiscal interest. My reading was that the sums which are 'tax free' because they are refund of contributions in UK are taxable in France. My advice would be for anybody who has the option of doing this to

1. Check out the facts before they move to France.

2. Consider yields versus the tax free sum. If you use it to pay off borrowings on 6 % fine but at current rates of interest it is no longer automatically a good idea even if tax free.

Anton Redman ( adrift in gender realignment post forum software change)

[Redcap]

[quote]Hi, I've just recieved my civl service lump sum too - it had already been taxed in the UK, so as I understand it (as an ex-UK taxman!!!) it is not taxable in France. However, if you can hang on a cou...[/quote]

Hello Penny,

Were you in the UK when you received your lump sum pension payment, or in France?  You say it had already been taxed in the UK, I thought the commutation was tax free?

How about calling your newest friend and going for a drink earlier!

I've about 4 weeks until my actual date for retirement from the police, so I'm a little bit concerned about this, part of me says that what 'Dreamers' says makes sense and is probably right but another part (the worrying part) says be careful!

Regards,

Bob

[Penny29]

Hi,

My lump sum was/is probably different from yours - it was a lump sum paid out when they sacked me for ill health (I didn't get an early pension - I have to wait many years for that, dang!!!!), so I  was taxed on the amount which went above the £30,000 non-taxable ceiling.

If you PM me privately regarding yours e.g Known taxable position in the UK etc I will ask my friend Francoise asap.

 

[Dick Smith]

Is the civil servants' lump sum tax free? Teachers are taxed on it.

[Redcap]

I don't know how civil servants pensions are run, mine, a police pension is an occupational pension scheme. I pay 11% of my salary every 4 weeks called 'superannuation', it is not taxed at this point. Then on retirement I have the choice of commuting part of my pension and taking a tax free lump sum, I then receive a monthly pension on which I pay tax in the UK, I cannot opt to pay tax anywhere else.

It is this tax free lump sum that worries me regarding the French tax authorities, even though I will not be resident when I receive it.

There must be some people out there on the forum who have retired with a tax free lump sum, how did it go for you? PM me if you don't want to 'come out', thanks.

Penny, I've sent you a PM, & thanks.

Regards,

Bob

[tel]

I like others on this thread retired before moving to France and my Fire Service Pension lump sum was paid whilst still a British resident.  I don't understand how some of you can be French Residents yet have not yet 'Retired' from a Civil Service job.  There was no way I could travel from Brittany to work my shift duty at a Fire Station.

As Redcap explains the lump sum is voluntary not compulsory, I could have chosen to take my full pension with no lump sum, or commute part of it in exchange for a lump sum, i.e. for every £100 pension I gave up I received a pre determined amount up to a maximum commutation of 25% of the pension.

[BJSLIV]

"Is the civil servants' lump sum tax free?"

Civil Service, Local govt, Firemen, Teachers ... Like everyone Lump Sum payments at retirement made  within normal  Inland Revenue Rules are paid tax free.

"I don't understand how some of you can be French Residents yet have not yet 'Retired' "

Presumably some people, like myself have retired early but their pension and the lump sum that goes with it will not be paid for a number of years.

[Dick Smith]

My good mate Alan has just been taxed on his lump sum.

[BJSLIV]

Perhaps your mate received a lump sum redundancy payment as well as , or instead of retirement. In which case any amount of redundancy compensation over £30k would be taxable. Thats why some redundancy schemes now phase the payments over a number of years to avoid the tax.

[Dick Smith]

That was indeed the case, I hadn't realised the difference. Worth considering if you are offered a 'package'.

[cheryl]

I'm awfully confused, so if anyone can advise me I'd be really grateful.

I'm due to start getting my BT pension early next year, and my understanding (I hope I'm wrong) is that as a French resident the lump sum, which would have been tax free if I was still living in the UK, will be taxable. Is that correct?

I've got the option of giving up all or some of the lump sum for a higher pension, but it doesn't sound very much as it's about £40 a year pension in exchange for each £1000 of lump sum given up.

I wondered about taking as much lump sum as possible without going over the tax allowance, then converting the rest to pension, but how much is the allowance for a couple?

If I took the lump sum in sterling and spent it in the UK is that OK or not?

Any advice would be really appreciated as I've got to tell the pension people what I want to do fairly soon

Cheryl

[Redcap]

[quote]My good mate Alan has just been taxed on his lump sum.[/quote]

Don't say things like that Dick, you put the willies up me!

Bob

[Boiling a frog]

Dont worry Redcap you dont pay tax on your communation as long as you are UK resident you don,t even declare it to the inland revenue. But if you were tax resident in France then that would be different you would have to pay tax on it as it is treated as income  

[Redcap]

It will be a close run thing as we are going out as soon as I finish, but I suppose that until we declare ourselves, we won't be classed as resident? Obviously I realise one cannot or should not be living there for months before setting the ball in motion.

Boy will I be glad to have something else to think about!!

Regards,

Bob

[LesLauriers]

[quote]It will be a close run thing as we are going out as soon as I finish, but I suppose that until we declare ourselves, we won't be classed as resident? Obviously I realise one cannot or should not be li...[/quote]

If this is to be a permanent move, you will be tax resident from the day you arrive! You could decide to attempt to cheat the system but that's not a choice I would make. Over lunch today our French based financial advisor was telling us about the experience of one of his clients, an armed dawn visit followed by a 13 month investigation which resulted in a 500€ fine for failing to declare one UK bank account! Rare, but it happens, do you feel lucky?

I paid 350GBP for advice on this and my employers also paid for advice from a different source, both sources said the French authorities say they will not tax either the redundancy payment or the commutation of pension (lump sum) payment, but refuse to give this in writing as the rules state that these are taxable for French residents.

The belief was that technically it is taxable and the advice from both companies was to have the money banked before arriving in France as all monies received after the day of arrival are taxable in France.

Please note this was not a Government pension, however my advice is to get it paid prior to becoming tax resident, then you know you have nothing to worry about.

[Boiling a frog]

[quote]It will be a close run thing as we are going out as soon as I finish, but I suppose that until we declare ourselves, we won't be classed as resident? Obviously I realise one cannot or should not be li...[/quote]

You should get your commutation cheque a couple of days after your official retiral date so you are still tax resident in the UK because of the rules re tax residency in the UK and even in France where you are only tax resident after 183 days in the Tax year which runs from Jan to Dec If you are moving out shortly you will not be tax resident in France this year because there are less than 183 days to run.The French tax authorities are really not interested if you are obliged to pay tax in the UK You complete a tax return in France with the minimum of information ie your name and address and the very last section of the tax return when you show your income from the UK I also gave them a letter saying I was in receipt of a UK govt pension and a copy of P60.The French authorities did not ask for any other proof and I eventually received my tax notification showing I had nothing to pay.The first year I was here they in fact told me not to bother with a tax return because I was here for less than 183 days.   

[LesLauriers]

[quote]You should get your commutation cheque a couple of days after your official retiral date so you are still tax resident in the UK because of the rules re tax residency in the UK and even in France wher...[/quote]

BAF,

If you move to France and make your home here you are tax resident from day one.

"The "home" test takes precedence over the "principle residence" test, and if it is possible to determine the place where a family usually gather or live, the time-spent criterion can be ignored. The 183 day rule is only applied where a couple does not have a "home" in this sense."

From PKF guide to Taxation In France.

I take this to mean that if you move to France having sold up in the UK, or if your wife and children live full time in France then you are tax resident from day one. 

 

Having consulted both PKF and Anderson Consulting, their view that it was advisable to have the money paid before becoming tax resident as the French tax authorities would not commit any decision in writing.

The level of understanding of the French taxation staff seems to vary a lot! It seems to depend upon to whom you speak.

[Teamedup]

I agree with Les Lauriers a senior tax official told me that the time counts from the day one moves here. And so even if one moves here late in the year, one should declare that small amount of time the following spring time when we all do our declarations.

[Pushkin]

Having read these postings, I can't decide whether to reach for the aspirins or the cognac!  I retired from the Civil Service in May but because of accrued leave we were already established in France before the lump sum was paid into the UK bank account and then rapidly transferred over here. CS pensions are said to be non contributory, but as the Scott Report showed (I think it was in 1980) we civil servants in effect pay more for our pensions than any others in government employ because the pension and lump sum are taken into account with every pay settlement.  The lump sum is not taxable in the UK, the pension is.  I called at the tax office in La Rochelle to get a certificate for the car before registering it in France and took the opportunity to discuss tax matters in general.  The line was that for government pensions etc taxed in the UK, there was no liability in France as they can only be taxed in the UK. I do hope this is right, because there is an embarrassingly big 4x4 out in the yard and a large swimming pool at the end of the garden now  

I read all I could find on French taxation laws before we got here and ended up more confused than when I started.  I am happy to rely on what I was told in La Rochelle and in case of difficulty I shall argue that liability to tax in two EU countries is demonstrably unfair.

Yours, reaching for the cognac,

Pete, not Sue    

[Redcap]

[quote]I agree with Les Lauriers a senior tax official told me that the time counts from the day one moves here. And so even if one moves here late in the year, one should declare that small amount of time t...[/quote]

I think that if one is still employed by a government body, civil service, fire, police whatever, where you would have to be resident in UK then you could not be resident in France as well. Pushkin 'came' over to their house prior to retiring from the job, I would say that's a strong argument for not being resident at that time. 

Regards,

Bob