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Moving to France - a good time in tax terms?


Tarn

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I read that moving to France after leaving a decent paying job in the UK to start up a small business in France can result in you being taxed in France on your previous years earnings - when you were doing quite well. (does that make sense?)

My question is, in general is there a time to avoid moving or is there a good time to move, for tax purposes. Would an extended period of gardening help?

Or is it a case of talk to a tax adviser?

John

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Oh no, TU has beaten me to it again!

Don't forget that the UK tax year is April-April, and the French tax year is calendar, Jan-Dec.

So, if you arrive in July 2005, you'll have to fill in a French tax return in about March 2006, in which you'll have to declare (for example)..... 6 months UK income of 9 million pounds a month, as well as your 6 months French income of 500 euros a month.

It all gets added up together, but who knows what they do with the total..... we're still waiting for our tax demand for last year.   Who knows, the relatively high total might put you into a higher tax band, or even wealth tax, who knows..... unless you have lots of offspring, of course, then you might benefit in France.   You can always get tax back from the Inland Revenue IR if you've already paid tax there (e.g. if you've used PAYE).  Sometimes.

Forget it, get a tax advisor!!     Actually, someone said not long ago that their French tax advisor told them not to bother about non-French income, and they apparently got away with it.  You could always find that post and ask them who their advisor was.......      

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Because of the different residency/domicile rules and the dual taxation agreement between Britain and France it seems highly unlikely that income earned while in one country will be taxed in the other. But as you have to declare your worldwide income (even though tax has been paid elsewhere) in France it could, as SB says, affect your tax band in France for the first year. You can get around this under certain circumstances by clever use of the E-form system which can allow you to live and work in one country and pay social security and tax in the other for a limited period, but here you are really getting into the realms of taking good, professional, paid-for financial advice, as suggested in the other replies.

The 'previous year's earnings' rule tends to apply to those who move here, do not work in France, but need to pay into the French health system before they have had the chance to have their true income assessed by having made a French tax return. That is to say, people who are not eligible for a form like the E106 for any reason. If you are starting a business you will pay a standard rate of social charges for new businesses in the first years, which is adjusted (up or down) in following years, unless you or your accountant can negotiate a different payment.

Do be aware that in France it is the social security charges that are far more significant than tax for many people, particularly if you have a business, so make sure that the financial advisor you choose understands this. Some 'tax advisors', particularly UK-based ones, do not. We have heard of people taking their advice and structuring their affairs in such a way as to save a small amount of tax, but with the result that the already high French social charges are almost doubled.

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If you arrive for example in November, your UK paye earnings from April to October will benefit from the full years allowances in the UK and this will probably result in a refund from the UK.

Arriving in France in October you will offset any French income, from date of arrival to Decenber 31, against the full year allowances here. You may be able to plan to receive interest payments from UK savings, after arrival, in order to use up your French allowances.

It is simply a case maximising the benefit of the full years allowances in both countries. A calculator along with paper and pen will help you to work it out.

Wealth tax is based upon world wide capital and property at Jan 1st if you are French resident on that day. You are not taxed in France on earnings received prior to, the day after, your date of arrival.
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Our plan is to go out mid September to mid December to work on our house (essentially a holiday), come back to UK within three months (E111) and spend Xmas / new year in UK. Then look at becoming resident in France in the new year. Then work on the house some more / plan starting a business. I will probably seek advice in France unless anyone can recommend a good advisor in the North of England? (If anyone can recommend an advisor / accountant in Detps. 81 / 34 that would also be helpful!)
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