living in France but where do I pay CGT and income tax?

[cassie]

Eighteen months ago we moved to France. We have recently filed UK tax return for 2013/14 and our first French tax return for 2013.

question (1) Will we continue to have to fill in UK tax forms as well as French? (we have our savings and private pensions in the UK)

(2) We are considering buying property in the UK to rent out> I would appreciate advice regarding taxation of rental income and Capital Gains tax( CGT )when we come to sell.

At time of sale will we have to fill in UK CGT forms and will we get the tax relief currently obtained by UK tax citizens? ( approx. £10,000 each)

Is rental income taxed in the UK? or France ?

We need information to decide whether to put property in joint names or my wife's name only, as she has lower UK income.

Many thanks

[Daft Doctor]

Hi, UK rental income is always be taxed in the UK, but as part of worldwide income is also declarable in France (assuming you are French tax resident). French tax is initially calculated on the whole lot, but you are then given a rebate from your French tax equivalent to the %age that your UK rental income represents of the whole.

Not 100% sure on CGT, but thought you were liable for payment in the UK until you'd been non-resident for 4 or 5 years. Others will know better on that one.

If you are already filling in UK tax forms, you will I think continue to need to do so, and certainly if you have UK rental income. If you haven't already done so you will need to fill in and have signed forms 'France Individual' for each of you. These are then forwarded both to the French tax authorities and HMRC to establish your French tax resident status. Hope that helps.

[tinabee]

If you haven't already done so, you can apply to have your savings interest paid gross, although not all financial institutions will do so, many will. The form you need for this is the R105

http://www.hmrc.gov.uk/forms/r105.pdf

[Daft Doctor]

Hi tinabee, I have to say I had absolutely no success with forms R105, I sent 4 or 5 off to various institutions along with copies of the letter from HMRC accepting my French tax residency, simply to be told that they would continue to deduct tax at source and I'd have to reclaim it annually from HMRC. The OP should maybe contact her banks in the UK and ask the question before wasting time, stamps and ink.

[Hereford]

I have posted about this before (non acceptance of form).  I was told by a staff member at HMRC that although the form exists none of the big banks will accept it.  This is certainly what we have found, they are too worried about money laundering regs etc.

[tinabee]

[quote user="Hereford"]I have posted about this before (non acceptance of form).  I was told by a staff member at HMRC that although the form exists none of the big banks will accept it.  This is certainly what we have found, they are too worried about money laundering regs etc.
[/quote]

Maybe it has changed during recent years but in 2006 the R105 was accepted by RBS, Natwest and Intelligent Finance, but rejected by Nationwide.

 

[Debra]

Capital Gains Tax is due first to the UK on UK property.  France recently started charging it for overseas properties so they would work out the bit they want and then give you a credit for UK GCT already paid.  It used to be that the UK did not charge CGT to non-residents but there is a change in the pipeline and from April next year they will charge non-residents CGT. Here is the consultation document about it here is an article about it .

I haven't read that cover to cover but as far as I know, they will still allow the normal letting relief and CGT allowances.  Don't expect that to never change though since they're now discussing not letting non-residents have the UK tax allowance against their rental income.  The discussion says it should only affect those whose main income doesn't derive from the UK (so those with UK pensions and rental income that makes up either 75 or 90 per cent of their income shouldn't be affected) but many believe that they will go ahead and do it for all non-residents regardless.

It's all a pain but think of people the other way around, who sell their second homes in France and are UK resident.  They get tax relief for the French tax paid against their UK CGT bill but as the UK doesn't recognise social charges as a tax, as per the double taxation treaty, they aren't included in the credit given.  Bit of a blow.  I'm trying to sell at a loss everywhere at the moment so none of this affects me but I like to keep informed just in case some rich person comes along and wants to pay a decent price for my property :) (laughing but why aren't the smileys working??)

[Araucaria]

[quote user="Debra"]Capital Gains Tax is due first to the UK on UK property.  France recently started charging it for overseas properties so they would work out the bit they want and then give you a credit for UK GCT already paid.  It used to be that the UK did not charge CGT to non-residents but there is a change in the pipeline and from April next year they will charge non-residents CGT. Here is the consultation document about it here is an article about it .

I haven't read that cover to cover but as far as I know, they will still allow the normal letting relief and CGT allowances.  Don't expect that to never change though since they're now discussing not letting non-residents have the UK tax allowance against their rental income.  The discussion says it should only affect those whose main income doesn't derive from the UK (so those with UK pensions and rental income that makes up either 75 or 90 per cent of their income shouldn't be affected) but many believe that they will go ahead and do it for all non-residents regardless.

It's all a pain but think of people the other way around, who sell their second homes in France and are UK resident.  They get tax relief for the French tax paid against their UK CGT bill but as the UK doesn't recognise social charges as a tax, as per the double taxation treaty, they aren't included in the credit given.  Bit of a blow.  I'm trying to sell at a loss everywhere at the moment so none of this affects me but I like to keep informed just in case some rich person comes along and wants to pay a decent price for my property :) (laughing but why aren't the smileys working??)

[/quote]

The planned change may happen next year, but I wouldn't bet on it.

In the consultation document HMRC says that it plans only to levy CGT on the gain that you make after April 2015. Quite what they mean by that isn't at all clear, but no doubt eventually HMRC will say how it will be calculated. Incidentally, the planned CGT charge for non-residents only applies to (effectively) private houses. Other kinds of property aren't caught.