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CGT - closing the loophole


Chuck&Betty

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Does anyone have any informaton on whether or not the new convention closing off the loopholes between France and UK has been ratified ? We are currently stuck with a house for sale (for the last 2 yrs)..and are considering returning to the UK until we can find a buyer..

 Also, when the changes are in place, does anyone know how the CGT calculation will be made?  Will it be on gains  made between the original price when you bought the property and sold it, or gains on the value of the property between when you become tax resident in France and then sell it? 

The reason for asking this question is  that if you look at the current 3 year rule with the Uk and sale of second property attracting CGT, the tax is only calculated on the gain made after the three year period has expired....the new convention would seem mightily unfair if France claim CGT benefits calculated on icreases in value during the period when the UK home was your only residence??

 

 

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Hi Debra - it is the house in the Uk that we are waiting to sell.  We have been here in France since October 2004, and now we have heard about this new CGT rule that is likely to come into force in 2007, we plan to go back to the UK before June 30th (less than 6 mths into the French year) - and re-register ourselves in the UK and get temping jobs or something.. so that if we don't sell until after the new rule is applied - we will not attract any CGT a we will be selling our main residence in the UK and will be UK tax resident again by then.  Also, we are assuming the worst as to the calculation -  viz.. that it will be calculated on any gain made since the house was bought - (less French allowances)...it's a bit of grasping at straws to hope they would treat it fairly - and calculate new residents gains only from the date of residency in France.. 

Have to say though- we have been really surprised that this isue is not more high profile - in fact we had to tell our English/French advisor about it - and we only found out because a friends book had made an error which caused us to do some research.. ..bit scary for all those people over here who have left a property rented in UK to bump up their caplital base in a few years time!

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The gain would be taxed in France under French rules - ie: forget about the three year rule, taper and letting relief available in the UK.

You would be looking at the total gain since purchase.  If you have owned the property for more than five years there is a 10% deduction in the gain for each further year of ownership - ie: no liability after fifteen years.

 

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Once your home is regarded as a maison secondaire then it will be taxed as such - not just from the date which it became your maison secondaire - so on the entire gain made from purchase to sale.

There is a period of grace during which you can sell your home.  I'm not sure of the exact rules - but definitely a year is allowable (see notaires de france website).  Two, I'm not sure.  If throughout the two years your house is on the market with an agent, vacant and not rented out then you may have a good case.  In the case of a house in France it is a question of convincing the notaire that it is not a taxable situation - for a property abroad it would be up to you to declare a gain.  However, I would consider taking professional advice.

 

 

 

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