Double Taxation Query

[Daft Doctor]

I am a UK resident, but have an apartment in a Residence de Tourisme, so have a french bank account with attached Livret savings account. In 2008 I made 65 euros untaxed interest on the Livret which I understood would normally need to be declared on my UK tax return, which I will be submitting shortly.

My french accountant actually declared the savings interest on my french tax return for 2008, but because I had losses from 2007 to set against income, I had no french tax to pay.

If I also declare this 65 euros interest on my UK tax return, I will be taxed at 40% on it, but usually would be able to offset the french tax paid under the dual taxation arrangements. However, as I have only had this interest offset against previous losses in France and haven't actually paid tax, does that mean that I won't be able to offset anything against the 40% uk tax charge, or can I legitimatelt state that I have paid the tax notionally by declaring the interest to the french authorities and having it offset against previous losses.

can anyone help with this. Any thoughts would be most welcome.

[parsnips]

[quote user="Daft Doctor"]I am a UK resident, but have an apartment in a Residence de Tourisme, so have a french bank account with attached Livret savings account. In 2008 I made 65 euros untaxed interest on the Livret which I understood would normally need to be declared on my UK tax return, which I will be submitting shortly.

My french accountant actually declared the savings interest on my french tax return for 2008, but because I had losses from 2007 to set against income, I had no french tax to pay.

If I also declare this 65 euros interest on my UK tax return, I will be taxed at 40% on it, but usually would be able to offset the french tax paid under the dual taxation arrangements. However, as I have only had this interest offset against previous losses in France and haven't actually paid tax, does that mean that I won't be able to offset anything against the 40% uk tax charge, or can I legitimatelt state that I have paid the tax notionally by declaring the interest to the french authorities and having it offset against previous losses.

can anyone help with this. Any thoughts would be most welcome.[/quote]

Hi,

      It seems to me that under art. 11 of the DTT this interest is taxable ONLY in the UK. There are exceptions under art.s 6 and 14 (see HMRC site) but they don't seem to apply in your case.

[Daft Doctor]

Hi, thanks for that. So are you saying that the accountant made an error in declaring it on my french return? If so, I will need to make sure that in the future I don't tell her about savings interest earned in France, though the numbers are always likely to be very small.

Further related to this thread however, I also made 700 euro profit from rental income in france in 2008, but again this was simply offset against 2007 losses by th French tax authorities. Should I also be declaring this 700 euro in the UK or is this not necessary. If I do need to declare it in the UK, once more there is the issue of whether any tax has been paid notionally on this income already in France and what I should therefore say to the UK tax authorities. Any further advice would be most welcome?

[parsnips]

[quote user="Daft Doctor"]Hi, thanks for that. So are you saying that the accountant made an error in declaring it on my french return? If so, I will need to make sure that in the future I don't tell her about savings interest earned in France, though the numbers are always likely to be very small.

Further related to this thread however, I also made 700 euro profit from rental income in france in 2008, but again this was simply offset against 2007 losses by th French tax authorities. Should I also be declaring this 700 euro in the UK or is this not necessary. If I do need to declare it in the UK, once more there is the issue of whether any tax has been paid notionally on this income already in France and what I should therefore say to the UK tax authorities. Any further advice would be most welcome?[/quote]

 Hi,

      IMO the interest should not be declared in france, unless there is provision to declare it as non-imposable in France. The problem is that your bank will certainly inform the french tax authorities of the interest. The best thing would be to discuss this with the tax office taking a french copy of the treaty (download from internet).

      I believe that rents are different,as the treaty says that rents arising in a country "may be taxed in that country"--so giving the french the right to tax, but not denying the UK the right to tax also--provided they give allowance for the tax paid in france in their calculation.

      As for the offsetting of rental losses in the UK, you need to discuss this with HMRC.

[Pickles]

The interest is taxable in the UK only.

Rents are taxed in France and in the UK, with credit being given against the UK tax liability for any tax paid in France (under the Double Taxation Treaty). The INCOME and EXPENDITURE from your French lettings need to be declared to HMRC and translated from € to £ as it arose/was incurred: in all likelihood the calculated profit will be different because the allowable expenses in the UK and France are different.

Regards

Pickles