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New UK France Tax Treaty In Force


dr orloff

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Summary HERE

Full HMRC details HERE

The one obvious significant change I see which could potentially affect those still owning UK property is that capital gains tax could now become payable on disposal. I say could because, as in all these things, and particularly on the French side, rules are frequently open to individual interpretation.

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[quote user="AnOther"]From the horses mouth HERE

[/quote]

Hi,

      The document is the statutory instrument putting the treaty into UK law . It was signed in Feb 2009. If you carefully read the last page , it gives the dates for it to take effect ONCE IT COMES INTO FORCE, this has not yet happened as far as I am aware . The statutory instrument also states that the date of coming into force will be published in certain official gazettes--again as far as I know this has not yet happened. If you are aware of the publication of the date of coming into force please let us have a link.

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  • 4 weeks later...
Hello,

Can anyone shed some clarity on my situation!? I moved to work in France 2.5 years ago, rent out my home in the UK and also rent in France. As I understand it, due to the new tax treaty as a French resident I will now pay 16% cgt and 12.10% csg on any profit from the sale of my uk home. Is this treaty offically in place?

I have an old Blevins Franks guide which states " A home that you rent to live in yourself counts as a residence. If you have more than one residence you can elect which property should be regarded as the principal residence for capital gains tax exemption. Such an election must be in writing. If no election is made then the inspector of taxes will choose which property, after looking at facts is to be considered as your main residence. A second property which you let to bona fide tenants is not treated as being available to you." I thought perhaps I could elect my English home as the residence principale but the last sentence scuppers that as it is not available to me. It looks like the only way I can avoid this is through time as I have owned my uk property for 9 years since 2001..if I hold onto it another 6 years before selling ( 15 years) will I be excempt of cgt? Only just picked up on this so abit of a shock!

Cheers, Andy.
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Another question! Do I now I have to pay CSG 12.10% on rental income from uk, even though I declare it in the UK? Also what is the taux effectif? I am concerned that I now will have to pay 12.10% on the brut uk renatl income BEFORE taking off interest payments etc. Or that this BRUT rental income will be addeed to my imposable income and will make me jump up the "bareme" for my impot sur le revenu! Cheers, Andy.
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The treaty came into force on Dec 18th.

HERE is the current BV article and the crucial sentence is:

As the French exemption on the main home only applies if the property

is your actual and habitual main residence on the day of sale, or when

put on the market and sale occurs within 12 months, it is possible that

the gain on a former UK home will now be taxable in France.

The difficulty I see in the levying of a tax by the French is in determining what amount of tax might be due.

Will a seller have to provide translated and notorised documents and how exactly will profit be defined, it cannot be the simple difference between purchase and sale price.

Although in France CGT liability can be partially offset against legitimate artisans invoices how will the French deal with the situation where say you bought a UK property for £100k, spent £50k of your own money on it, doing all the work yourself, and sold it £175k. With no builders (artisans) invoices to produce as far as the French are concerned will that that equate to a profit of £75k and a commensurate tax bill ?

I have no doubt that we will be hearing of some real time cases in due course [;-)]

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[quote user="AnOther"]

how will the French deal with the situation where say you bought a UK property for £100k, spent £50k of your own money on it, doing all the work yourself, and sold it £175k. With no builders (artisans) invoices to produce as far as the French are concerned will that that equate to a profit of £75k and a commensurate tax bill ?


[;-)]
[/quote]

Logically yes. 

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[quote user="Andy81"]Another question! Do I now I have to pay CSG 12.10% on rental income from uk, even though I declare it in the UK? Also what is the taux effectif? I am concerned that I now will have to pay 12.10% on the brut uk renatl income BEFORE taking off interest payments etc. Or that this BRUT rental income will be addeed to my imposable income and will make me jump up the "bareme" for my impot sur le revenu! Cheers, Andy.[/quote]

Hi,

       Your UK rents are taxable ONLY in the UK. This means they are not subject to french CSG.  However they are taken into account when calculating the "taux effectif", which is the rate of tax you would pay if all your income was taxable in France.  This rate is then applied only to the income taxable in France.

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[quote user="Andy81"]Hello, Can anyone shed some clarity on my situation!? I moved to work in France 2.5 years ago, rent out my home in the UK and also rent in France. As I understand it, due to the new tax treaty as a French resident I will now pay 16% cgt and 12.10% csg on any profit from the sale of my uk home. Is this treaty offically in place? I have an old Blevins Franks guide which states " A home that you rent to live in yourself counts as a residence. If you have more than one residence you can elect which property should be regarded as the principal residence for capital gains tax exemption. Such an election must be in writing. If no election is made then the inspector of taxes will choose which property, after looking at facts is to be considered as your main residence. A second property which you let to bona fide tenants is not treated as being available to you." I thought perhaps I could elect my English home as the residence principale but the last sentence scuppers that as it is not available to me. It looks like the only way I can avoid this is through time as I have owned my uk property for 9 years since 2001..if I hold onto it another 6 years before selling ( 15 years) will I be excempt of cgt? Only just picked up on this so abit of a shock! Cheers, Andy.[/quote]

 

Another solution would be to sell the property with vacant possession - in other words end the contract with your tenenat.  You might even move back in for a short period.

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how will the French deal with the situation where say you bought a UK property for £100k, spent £50k of your own money on it, doing all the work yourself, and sold it £175k. With no builders (artisans) invoices to produce as far as the French are concerned will that that equate to a profit of £75k and a commensurate tax bill ?

Logically you would be charged CGT unless you can demonstrate that you have used registered French artisans to do the work.......[;-)]

 

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Hi Andyh4,

Yes woke up at 3am yesterday wondering about the not letting it out option! Then again how long do you have to leave it vacant before you can claim it as your "residence principale" 6 monts, 1 year...? As it is curently worded,

if there are no tenants in the flat, it is available to me and in such a case it is up to me to elect which is my residence principale, despite the fact I live and work in France and my residence principale is blatantly my french one ( though I am not owner this seems to count for nothing!) Thanks for the replies re. rental income income...bit of a bummer if I declare them as I will go up a "bareme" on my tax declaration!

Thinking about going to see a tax inspector at the hotel des impots but have a feeling I would be putting myself into "la guele du loup" as someone put it to me today! Apparently they dont let go once they get a grip of you, probably best to wait and see. Like someone stated, I have done a lot of work on my property in UK, how is that factored? Seems a nightmare. Best option will be "residence principale" or waiting 15 years as far as I can see. Just need some definitive info. on the "residence principale" bit!

Cheers, Andy.
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I'd be grateful if someone could confirm that I have understood correctly the situation as regards capital gains on my uk property under the new French law. Any light than can be shed on my situation as far as uk capital gains goes would also be gratefully received.

I'm a uk resident with my main home there, which I have owned for 15 years in September. I have a second home in France. I should like to become a French resident this tax year, and live all the time in my house in France. If I rent out my uk property, then later sell it, when I sell it, the question of French capital gains tax will arise. Even if I were renting it out, is it the case that if I sell it after 15 years, I have no capital gains liability in France? (If anyone knows whether I would be liable for any uk capital gains tax as it would no longer be my main residence, I'd be very grateful - my call to the tax office was, shall we say, unelightening.)

If I were to sell the uk property, probably before September, and become a French tax resident immediately after, would I still have no capital gains liability? Would the same apply if I were to put it on the market immediately after becoming a French resident? My understanding, but might need to be corrected, is that I wouldn't have such a liability.

My understanding is that if I do rent out my uk home, social charges might be payable in France on the rental income. I've seen conflicting reports on whether or not they would. Anyone able to clarify please?

Thanks very much.

Kind regards

Loire
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I think the tax professionals are going to have a bumper time with this one.

At this early stage I can't imagine that asking either HMRC or the French Impots is going to prove at all fruitful, much less definitive.

Happily I'm not in that situation.

Bonne chance.

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Someone at HMRC must be awake as we had a letter this morning asking if we had any UK property,where we stayed in UK on out visits and dates of entry and exit from the UK for the last 3 years?In our response They might perhaps note that in 2007 our total days where 30,in 2008 22 and in 2009 15. Perhaps they'll deduce something from that about the UK. As we stay with Daughter I expect a letter in 12-14 weeks asking if we pay rent!!To date 7 different tax offices have had all the relevant paperwork from the Hotel des Impot giving our tax records from 2003. Yesterday we had a letter from the same office asking when we leaving the UK? I wonder how much stress or how many heart attacks they cause?
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