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Double Counting Tax


Lindnarden

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Hi all,

We moved to France last September and have now bought a house here. I have a letter asking for a tax return for 2004 (ie I assume Sep 2004 to Apr 2005) I have earned no money in France in this period as we have been living off the proceeds of the sale of our house in England and a redundancy payment from my last job.

If I declare these two items as the source of my income for that period am I going to be asked to pay tax on them again ?

We also have another house in England which provides some rental income although I haven't touched any of this money since we moved here as I am kind of burying my head in the sand as to which location needs to know about it.

All thoughts gratefully received

 

cheers.

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We moved to France last September and have now bought a house here. I have a letter asking for a tax return for 2004 (ie I assume Sep 2004 to Apr 2005) .

No the French tax year ended in December 2004

I have earned no money in France in this period as we have been living off the proceeds of the sale of our house in England and a redundancy payment from my last job.

If you have moved lock stock etc to France you have to make a return even if you have zero income. It is to your advantage to do so to start the clock running on your capital gains tax exemption on your house

If I declare these two items as the source of my income for that period am I going to be asked to pay tax on them again ?

No . Spending your own capital isn't income.

We also have another house in England which provides some rental income although I haven't touched any of this money since we moved here as I am kind of burying my head in the sand as to which location needs to know about it.

Sounds like you will need to let both sides know, particularly in your first year, as you were in any case resident in the UK for part of the tax year. Also you are presumably earning interest on your lumps sum which will have to be notified in France even if the money and interst are still in the UK. The same applies to your rental income.

The good news is that you only pay tax once, and in your case the liability in France is probably zero. Fingers crossed that you find a sympathetic official who will waive the fine for non-submission of the tax return which is an offence.

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Is it a request from the UK or French Authorities ?

French tax year is the calendar year, Jan to Dec, for 2004 you were in the country for under 183 days and are therefore taxable only for bank interest earned in France on money on deposit in France.

For 2005 you will need to make a UK return for April to March of interest, rental income etc. You also need to make a French Tax return with your Worldwide income. You are allowed to offset the tax which you have paid or is payable in UK against the French Tax due but cannot reclaim in extra UK tax from the French.  

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Thanks for the words of wisdom people. We have moved lock, stock and two smoked sausage barrels and the request was from the French authorities.

I think this part of the process will be the easiest bit as my wife continues to work freelance in the UK as a photographer (and wants to continue paying tax there) but I want to set up a business in France using her images as the basis of various products and thereby shoehorn the pair of us in to the French social secuirty / health etc system.

First I perhaps need to finish building a house to live in

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No I think first you need to send in a french tax return for 2004. If you live here you will have to give world wide income for you both and if that is zero that is fine. And show the tax already paid in the UK.

I wouldn't mess with the tax man. I don't know why they are onto you, but you should have done this without being asked anyway.

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We also have our house in the UK rented out, and when we left the UK we had to inform the Inland Revenue of our address in France, where they send our Self Assessment forms. Rental income in the UK is not taxable in France but must be declared on the French declaration. If you rent out your house through an agent, and live abroad, the agent is legally obliged to deduct tax from the rent and send it direct to the Inland Revenue. You may be allowed to have your rent without any deduction if no income tax is due on it, or if you already fill in Self Assessment forms. In which case the Inland Revenue sends an exempt certificate to the letting agent.
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" Rental income in the UK is not taxable in France but must be declared on the French declaration "  My reading of the law is that it taxable in France if you are resident in France BUT that it is possible that UK withholding will exceed the French tax due and therefore you will have no more to pay
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The advisor at our local tax office (in France) told us when we submitted our first French tax returns in April that rental income in the UK is not taxable in France. She showed us where to enter the income - in the 'non-imposable' section. We will soon find out if she is right!
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