house in the U.K swap for french property.

[Pun]

we still own a cottage in the U.K. and wondered what the legal situation is if we wanted to do a swap for a second french property ?

we read that some people have taken on more than they thought they could handle or are living a nightmare in France and just can,t wait to get back to the U.K but have no home to speak of,

would it be legal to do a swap in this way?

[Nick Trollope]

It would be legal to swap, but it would involve "money"  passing between the parties and the payment of fees and taxes in France. The money would need to be realistic - if you tried to sell & buy the property for 10€, the Notaire would assume that you were trying to diddle the French state and you would be treated accordingly.

 

[hastobe]

You can have an exchange of assets without the exchange of money.  If the exchange is conducted between two parties at arm's length then it will be assumed that the open market value of the two assets are the same.  A more likely scenario is where there is a difference in the value of the two assets and a cash adjustment is made.  You should  be aware that both parties will have disposed of an asset and so (potentially) be liable to capital gains tax.  The proceeds of the disposal is the total amount of any consideration received (i.e. the market value of the asset received plus any cash adjustment received).  In the UK the case is likely to be referred to the valuations office of the Revenue. 

UK SDLT will be payable by reference to the total consideration received and arises because a beneficial (and legal) interest in the property has been transferred.

Although I have dealt with this type of transaction from a UK perspective, in all the cases I have dealt with, both properties have been UK situ assets so I can't give you detailed advice on the French side of the transaction.  I suggest you take advice from good (tax) accountants who understand both the French and UK implications.

Kathie

[Pun]

Hi nicktrllope and katie,

many thanks for your help, I,ll have a good think about the situation, my cottage is in northwales and a little like france for the views hence my thinking if anyone wanted to return, then they could have a bit of peace but have the english weather,

once again thank you both.

[Nick Trollope]

[quote user="hastobe"]You can have an exchange of assets without the exchange of money.  If the exchange is conducted between two parties at arm's length then it will be assumed that the open market value of the two assets are the same.  A more likely scenario is where there is a difference in the value of the two assets and a cash adjustment is made.  You should  be aware that both parties will have disposed of an asset and so (potentially) be liable to capital gains tax.  The proceeds of the disposal is the total amount of any consideration received (i.e. the market value of the asset received plus any cash adjustment received).  In the UK the case is likely to be referred to the valuations office of the Revenue. 

UK SDLT will be payable by reference to the total consideration received and arises because a beneficial (and legal) interest in the property has been transferred.

Although I have dealt with this type of transaction from a UK perspective, in all the cases I have dealt with, both properties have been UK situ assets so I can't give you detailed advice on the French side of the transaction.  I suggest you take advice from good (tax) accountants who understand both the French and UK implications.

Kathie
[/quote]

The problem in France would be the French taxes and Notaires fees, which are based on a percetange of the selling price (about 7%). If the Notaire (a tax collector after all) thinks that you are selling too cheap (free, as in an exchage) then he would apply a notional value to the sale and apply the appropriate taxes, fees and (probably) a penalty.

In reality, it would need to be done as 2 seperate transactions - the French & UK systems just aren't compatible. I think that one of the parties would actually need to take a bridging loan, so that the taxes could be deducted from something!

 

[hastobe]

Consideration can comprise cash, shares, assets, promissory notes etc - all of these are acceptable in most tax jurisdictions.  The percentages would then be calculated by reference to the total value of the consideration - in whatever form.  The world has moved a long way since the days when everything was paid for by cash [;-)]

Kathie