Capital gains tax on UK property

[Kitty]

Having read all the threads on capital gains tax liability on UK residents who wish to change to French residency and who own UK property, there seems to be (at least) two unanswered questions on this Forum:

1. Has the double taxation treaty between France and UK (possibly signed in 2004) come into force yet?  Someone on the Forum mentioned that it might apply on 01.01.09.

2. Does the 6 - 15 year ownership rule, which reduces capital gains tax in increments, apply to UK property owned by French residents as well as French property owned by them?

 

[dr orloff]

1.No

2.Yes

[Kitty]

Thank you Dr O.  A couple of supplementaries (hope this is the spelling), if I may:

1. Do you know have any information about when the treaty may be brought into force?

2. Does the start point to qualify for the 6 - 15 year rule apply from the date you become a French resident or does it apply from the date you bought the UK property (if this is before you became resident)?

 

[parsnips]

[quote user="Cathy"]

Thank you Dr O.  A couple of supplementaries (hope this is the spelling), if I may:

1. Do you know have any information about when the treaty may be brought into force?

2. Does the start point to qualify for the 6 - 15 year rule apply from the date you become a French resident or does it apply from the date you bought the UK property (if this is before you became resident)?

Hi,

   1.Nobody knows, but I have seen the opinion expressed by some"experts" that it may never be ratified.

   2.It starts from the date you bought the property.

 

[/quote]

[dr orloff]

[quote user="Cathy"]

Thank you Dr O.  A couple of supplementaries (hope this is the spelling), if I may:

1. Do you know have any information about when the treaty may be brought into force?

2. Does the start point to qualify for the 6 - 15 year rule apply from the date you become a French resident or does it apply from the date you bought the UK property (if this is before you became resident)?

 

[/quote]

 

1.No.  Neither does anyone else.

 

2. The latter.

[Kitty]

Thanks Dr O.  Very precise and knowledgable.  Just what this patient needed....

 

[bubbles]

good on diagnosis.

bedside manner? ........er.

well, who cares?

brilliant replies.

[Vanman]

It's very unlikely that the 2004 double tax agreement between the UK and France will ever come into effect, as there is a new (2008) treaty that is clearly intended to replace it. The 2004 one took years to negotiate, and by the time it was in its final form it was out of date......

[Vanman]

If I have understood the new treaty properly ......

(if you want to try it out yourself, it's here: http://www.hmrc.gov.uk/international/france.pdf )

                     ...... then it can't come into force (for capital gains tax purposes) in the UK before 2010/11 (ie not before 6 April 2010), and in France before 1 January 2010.

And it will only come into force as early as that if it is ratified this year (ie before 31 December 2009). And although that might happen, I wouldn't hold my breath.

[dr orloff]

[quote user="bubbles"]good on diagnosis. bedside manner? ........er. well, who cares? brilliant replies.[/quote]

 

I've got a sore throat.

[mint]

Physician, heal thyself?

[Kitty]

Sweet - I have sent you a PM about something completely different....

 

[mint]

Just read the PM, Cathy.  No probs, I have replied!

Take care

[oldgit72]

But presumably you would then owe CGT in the UK as you would be French resident and not UK resident? In the same way that you would owe CGT on a French property sold whilst being a UK resident?

[dr orloff]

UK does not levy CGT on non-residents.

[oldgit72]

Nice

[Senga]

Does anyone have any up to date information on the 2008 tax treaty. Has it been ratified yet? On the UK Tax website it still shows it as signed but not in force.

What would happen if it was in force, as has been suggested, in France on 1/1/10 and in the UK 6/4/10; if a house (in the UK) was sold between those 2 dates? we are french tax payers.

Thanks

[parsnips]

[quote user="Senga"]Does anyone have any up to date information on the 2008 tax treaty. Has it been ratified yet? On the UK Tax website it still shows it as signed but not in force.

What would happen if it was in force, as has been suggested, in France on 1/1/10 and in the UK 6/4/10; if a house (in the UK) was sold between those 2 dates? we are french tax payers.

Thanks[/quote]

Hi,

    Still not in force when I checked yesterday. It has been suggested that when it does come in it will be as you say 01/01/10 for France, and either the same, or 06/04/10 for the UK.

     As for your question ,as french taxpayers ,if it came in on 01/01/10 ,gains on a sale of your UK house on 02/01/10 would be liable to tax in France. It will probably never be liable in the UK as the UK does not tax the capital gains of non-residents (at least, not yet--we await the pre-budget report),

      Having said that the gains would be liable in France, you cannot be expected to be up to date with international tax law,so it will be necessary for the french tax authorities to amend their forms and notices to make it clear that the law has changed and that such gains are to be declared.  Knowing how they operate this could take some time. In the meantime it would be worth not declaring and (with the money in the bank -just in case) waiting to see if they queried your declaration (made in 2011, don't forget). You cannot be penalised if you declare promptly after being questioned.

     

Para 6 of article 14 of the treaty states-- that... (other provisions)... do not affect the right of a contracting state to tax any gains made by a fiscal resident of that state.--- It does not state that they shall be taxed , or that they have to be declared--that will be up to the relevant state, in this case -France to arrange.

[Senga]

Thanks, that's very helpful. I've been told that because we've had the house more than 15 years it won't attract CGT here in France even after the treaty is in force but would be liable to CSG and CRDS.

[dr orloff]

I haven't checked recently but the last time I did (a couple of months ago) I understood that the latest treaty had been ratified in the UK but not yet in France. As I understand it the treaty comes into force in the tax year following the tax year in which it is ratified. And both countries need to ratify it, obviously.

The 15 year rule would mean CGT would be exempt in France. I don't therefore see how they could apply social charges.

I wouldn't wait for the French authorities to post guidance. I would assume that in France as in the Uk igorance of the law is no excuse, with or without guidance.

[parsnips]

[quote user="Senga"]Thanks, that's very helpful. I've been told that because we've had the house more than 15 years it won't attract CGT here in France even after the treaty is in force but would be liable to CSG and CRDS.[/quote]

Hi,

     If as you say you have had the house more than 15 years, then as the Doctor says it ,would not be liable to any CGT or social charges in France;

[Llantony]

Interesting... I've been concerned that if we sell the UK house while living in France, we'd have to pay UK capital gains tax. We may have to sell it as it is hard to survive in France on our pension. We only bought it in 2007 so we could clear the mortgage after 17 years in a bigger house. Would we therefore pay tax in France on the sale of the UK house?

[dr orloff]

Yes. With the implementation of the new UK France tax treaty then you would be liable to French tax on the sale of your UK house. However, as you bought the house in 2007 the value may not have risen much, if at all.