Selling and Capital Gains

[Tia]

Hi

I,ve read through some previous post but just wanted to clarify as a uk residence and selling our house in France we have to pay 16 % french captial gains but we have had the house for 5 years in July does the capital gains percentage reduce at this stage and if so what to please ??

Thanks

 

[Will]

After five full years of ownership, plus-values liability reduces by 10% each year. So after 15 years the liability is zero.

[BJSLIV]

It's worth remembering that the reduction in the tax due in France has the effect of increasing the potential bill in the UK!.

So after 15 years ownership in France there will be no CGT payable in France, but there is likely to be a largish bill in the UK.

 

 

 

[Tia]

Hi

Thanks Will so in July (5th full year) the 16% capital gains tax reduces ?

[nectarine]

it's actually as soon as year 6 starts, then that's the 10% reduction so you pay 90% of the profit. In the first five full years you pay 100%. Then, every year after that the tax reduces by 10% (i.e. 80% in year 7, 70% in year 8 and so on) until it comes to zero.

Remember to keep any bills for improvement work - plumbing, electrics, fosse, etc - since these can be offset against the profit and thus lessen the tax.

[Tia]

Ok thanks for that now I undersatand cheers

x

[Simon-the-censored]

Tia - do remember about your UK CGT liability for the French sale (as BJSLIV states above).

Believe me - the French authorties pass all the sale info to HMRC!. So - this means your total liability could be either 18% or 28% of the gain (above £10,600) depending on your overall income tax liability / rate.

Therefore as a UK resident, any amount you pay to France is simply deducted from your overall UK bill but the total amount due stays the exactly the same! The French CGT due is automatically witheld from the sale proceeds by your notaire.

Simon :-)

[Tia]

Thanks for that I dont think by the time we finish we will have made enough for the Uk tax. From what I understand in simple terms it is sale price less estate agents fees less solicitors fees (from when buying house) less admin fees less balance on mortgage less any improvement receipts and then what ever is left you pay 16% to French tax and then the difference to Uk tax but with uk allowance for both of us we shouldnt have to pay any. It makes you think whether its worth selling by the time you have finished.

We have had the house five years in July so was hoping a slight reduction then in what we have to pay out in gains

I have been trying to work out how much we will actually make but its very difficult lol

I understand I cant offset the interest on the mortgage which is a shame - Have I forgotten anything else

 

[mint]

What about the exchange rate now being more favourable to the euro?

What happens if you make a very small euro loss but make a sterling gain?  I know at least 2 couples who managed to make money although they didn't sell for a great deal more than they paid.

[BJSLIV]

From what I understand in simple terms it is sale price less estate agents fees less solicitors fees (from when buying house) less admin fees less balance on mortgage less any improvement receipts and then what ever is left you pay 16% to French tax and then the difference to Uk tax

More or less right.

But the tax rate is now 19% not 16%

The good news is that you deduct the purchase price, not the balance of the mortgage.

One last bit of bad news is that if the sale price is over 150,000 euros, then the Notaire will appoint a fiscal representative which will cost you 1% of the sale price.

And as Sweet17 says you will also be liable on the exchange rate gain back in the UK.

 

 

 

 

 

[Tia]

Thanks for info - yes I was working out from balance of mortgage rarther than purchase price so that will make a difference and also like you say the exchange rate its all swings and roundabouts just wish we could afford to keep it to be honest lol

 

[Benjamin]

[quote user="BJSLIV"]

One last bit of bad news is that if the sale price is over 150,000 euros, then the Notaire will appoint a fiscal representative which will cost you 1% of the sale price.

[/quote]

There was a posting some time ago where the seller got all of his paperwork together and took it to his French tax office. They agreed his calculation which he then showed to the Notaire and therefore no requirement to take out this "insurance" to cover the Notaire.

Maybe you need a helpful tax office and a co-operative Notaire but it can be done.

[Pickles]

[quote user="sweet 17"]What about the exchange rate now being more favourable to the euro?

What happens if you make a very small euro loss but make a sterling gain?  I know at least 2 couples who managed to make money although they didn't sell for a great deal more than they paid.[/quote]

The French tax calculation is straightforward. The UK one is less so, because you have to convert all the payments into sterling at the exchange rates which prevailed on the dates on which the payments were made. Hence you could quite easily have no French txaable gain, but a whopping UK tax liability resulting solely from exchange rate fluctuations. Remember, the £ was trading around 1.6€ not long ago!

Regards

Pickles

[virginia.c]

Do the same rules apply if the French property is the only property, but used as a maison secondaire?

[Benjamin]

[quote user="virginia.c"]Do the same rules apply if the French property is the only property, but used as a maison secondaire?[/quote]

The experts will be along shortly as I've never been in this situation but I suspect that you are not registered for paying (income) tax in France and this will be your undoing.  [:(]

[Pickles]

[quote user="virginia.c"]Do the same rules apply if the French property is the only property, but used as a maison secondaire?[/quote]

I am assuming that your French property has never been your principal private residence. My understanding is that if it has never been your PPR, then any gain is taxable in France and the UK, with tax credit in the UK for the amount paid in France.

Regards

Pickles

[Daft Doctor]

Hi, related question but not quite same situation.  We have a leaseback which we are planning to sell.  If and when we sell it (I know -  bonne chance!!) , we will make a substantial capital loss.  As it is a leaseback property and we are in the French tax system under BIC non-professionals, am I right that as the apartment is a business-type asset the capital loss (sterling equivalent) can be offset against any UK capital gains in the same UK tax year?   Insight gratefully received.

[Jon 1]

In terms of deductions from capital gains, is it not the case that you don't have to produce receipts for work done, if you simply claim the set 15% deduction?

[parsnips]

[quote user="Jon 1"]In terms of deductions from capital gains, is it not the case that you don't have to produce receipts for work done, if you simply claim the set 15% deduction?[/quote]

Hi,

    To get the flat rate 15% you have to have owned the property 5 years.

[Jon 1]

Parsnips,

If you have owned the property for over 5 years, is it just a simple matter of requesting the Notaire deduct 15% from the French CGT?

[Simon-the-censored]

Jon1 - no need to 'request' anything - your notaire will simply deduct the correct amount of CGT from the sale proceeds and forward it to the fisc!

Simon :-)

[Jon 1]

So the notaire would automatically take account of the 15%. There is no official form or anything?

[mint]

Don't you have to pay a fiscal representative to work out your gains or losses?

[Jon 1]

[quote user="sweet 17"]Don't you have to pay a fiscal representative to work out your gains or losses?[/quote] Further back in the thread it mentions this, but only if the sale price is over 150,000 euros

[Jon 1]

[quote user="Simon-come-lately"]Jon1 - no need to 'request' anything - your notaire will simply deduct the correct amount of CGT from the sale proceeds and forward it to the fisc! Simon :-)[/quote]Simon-come-lately - do you know if there are forms to fill in for the 15%. I ask because I need to know if I have to collate and provide any receipts. Thanks