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Paying taxes in UK or France?


HannahSmith

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Sorry if this has been asked before  (but I couldn't find it searching).

Can you elect to pay tax in either the UK or France on rental income from the UK and on savings interest?

If you pay tax in the UK on the above, then how exactly do you get a tax credit on your French tax i.e. do you deduct the amount of tax paid from your income tax payable and pay the rest?

Thanks - very confused!

Hannah

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You can pay tax in Uk but it will be added to your French return and you then pay or receive credit for any difference here. In addittion you will pay 11% social charges on your savings interest.

I believe that you are better to have your rental income taxed in Uk but unlikely that it would benefit you to have your savings taxed in UK, depends on circumstances.

There are a number of tax efficient French savings plans.
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Ah - so basically I will pay the equivalent of French rate tax, whether it is taxed in the UK or France, the only difference being whether I get it taxed in the UK first then France, or France only?

The reason I ask is because I thought it might be better to get rental income paid in the UK so to use up UK tax free allowances, but if you have to then pay any difference between the UK tax (nothing) and what you would pay for taxing it in France, you might as well pay the whole thing in France to start with?

Or have I got this completely wrong?

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Ah - so basically I will pay the equivalent of French rate tax, whether it is taxed in the UK or France, the only difference being whether I get it taxed in the UK first then France, or France only?

The reason I ask is because I thought it might be better to get rental income paid in the UK so to use up UK tax free allowances, but if you have to then pay any difference between the UK tax (nothing) and what you would pay for taxing it in France, you might as well pay the whole thing in France to start with?

Or have I got this completely wrong?

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My understanding is that UK rental income is taxed in UK and whilst not taxed again in France it is effectively taken into account to establish the rate of tax to be applied agaist income taxable in France.

Someone in this position will no doubt clarify.

You should be aware though that CGT in France could apply to the sale of your UK property once the new France / UK treaty is ratified.

Given the questions you are asking I would strongly advise you to buy the book "Taxation In France" by PKF available through LF and to take proper advise prior to leaving the UK as there are steps you can take to minimise taxation.
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[quote]Sorry if this has been asked before (but I couldn't find it searching). Can you elect to pay tax in either the UK or France on rental income from the UK and on savings interest? If you pay tax in t...[/quote]

Sorry Hannah if you are going to be confused again, but I am a bit surprised by the answers given to you, as they appear to assume you are not a French resident.  Surely the answer to this question depends on where you live.

When I moved to France, I asked the UK Inland Revenue if I had a choice about where I paid income tax and was given this short sharp reply.

"I would advise that your do NOT have a choice in the country to which you must pay tax.  You will be liable to tax in your country of residence, and failure to apply for exemption from UK tax may result in your being liable in both countries".

So if you live in France as a resident, you should declare your rental income from the UK in France (and any other income received worldwide).  If you complete a double taxation form, available from the Centre for Non residents at Nottingham, you will be exempt from UK tax on this income and it should not  count as UK income in terms of your personal allowance (PA)  in the UK, that also means that if you do a tax return in the UK still and your UK  income is less than your PA you should get a rebate on any tax paid on savings etc.  

 

 

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Well, after 4 years in France it seems there are as many interpretations of French/English tax rules as there are French cheeses.

Here's my shot. Resident in France with English income (no French earnings). B4 leaving the UK my accountant said I would only be taxed in the UK, as per the double taxation treaty. If I had French income further down the line then I might, or might not, get some allowance in the UK. After two years I got a tax return from the French tax authorities. After a quick consultation with a English accountant practising in Paris he said just give them details of your UK tax office and say you have zero French earnings. That was done and to date I have never received any other communication from the French tax authorities and still pay UK tax.

The interesting thing here is that us expats seem to be worried to hell about getting things just so in France, whereas all of us back in Blighty were probably expert at trying any number of wheezes to avoid UK taxes and VAT, etc. Surely one should stop worrying and get on with living? After all I daresay the French are not too bothered with us small time folk; they're probably after the big boys with multiple property portfolios, lease-back schemes and posh gaffs on the Riviera.

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Resident in France with English income (no French earnings). B4 leaving the UK my accountant said I would only be taxed in the UK, as per the double taxation treaty. If I had French income further down the line then I might, or might not, get some allowance in the UK. After two years I got a tax return from the French tax authorities. After a quick consultation with a English accountant practising in Paris he said just give them details of your UK tax office and say you have zero French earnings. That was done and to date I have never received any other communication from the French tax authorities and still pay UK tax.

No capisco.  You're a French resident, but you don't do a French tax return?   What about the French requirement to declare worldwide income?

Bof, good luck to you!!   Long may you stay out of their reach.   I wish we could!!!    

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On the CGT front, you're OK selling your house now as CGT is payable in the country where the property is located. That's about to change when the new tax treaty kicks in. Under UK law, you wouldn't be taxed for selling your main residence and it still counts in UK law as being your main residence whilst you're abroad "temporarily".

I'm in the slightly peculiar situation of still being technically employed in the UK even though I'm running my own little hotel here. Anyway, as a result of that I queried the whole situation with the UK tax people a while ago and eventually got a letter out of them which seems to say that I'm taxable on income etc. arising in the UK as though I were still there (presumably this means I get a tax free allowance).

I wonder though about the dual taxation thing in that the French and British tax years are quite different? If one has to declare income from the British tax return on the French one, which year do you use? Would my March 2005 UK tax return effectively get added to my French 2005 one?

Also what's the situation re ISAs and PEPs? Are they 1) taxfree or 2) treated as though tax was already paid? It doesn't matter if you're still in the UK, but if 2 applies then it's still worthwhile to have them whilst in France whereas that may not be the case if 1 applies.

How come we have to fill in a UK tax return anyway? I had income arising in France before moving here but never filled in a French tax return. Will we stop getting UK tax returns at some point in the future?

 

Arnold

 

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Arnold 

I wish I knew why I still have to do a UK Self Assessment, this year I was told by UK IR not to declare my pension from the UK as it is exempt now, perhaps they do stop after a while, mind you I got the tax I paid on Tesco savings interest back doing a SA.

I seem to recall on a previous thread, it was stated that you have to be careful about PEP's and ISA's as although they have tax advantages in the UK, these do NOT apply in France.

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Interest or income paid on Peps, Isa,s Tessas is subject to 11% social charges and income tax at your appropriate rate. Where applicable health charges and wealth tax also apply but in the case of wealth tax it is the capital and interest that are taxed.
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I'm not sure, but I think I came across an exemption aimed at pensioners living in another european country a while ago. If all (or substantially all) of their income arises in their home country (as opposed to where they're actually living), the home country handles the taxation. That's presumably why pensioners need one of the E forms to get into the health system here without having to pay for it as they otherwise would.

Again, not sure, but I gather that it's not so much French residents but French economic residents that have to declare their worldwide income.

If you really wanted to milk the system for all it was worth, you could do as a friend of ours did accidently and not stay in any one country more than 3 months at a stretch. I don't think he has realised it, but I think that he could quite legally opt out of paying tax anywhere.

 

Arnold

 

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Mascamps said

"Again, not sure, but I gather that it's not so much French residents but French economic residents that have to declare their worldwide income."

Oh go on then, I'll fall for it - what is the "official" definition of of a French resident as opposed to a French economic resident?
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So what is the situation if you are employed and resident in the UK, and therefore paying tax in the UK, but also have a gite in France and pay tax for that income over there.  Can the UK IR tax me again on the gite income (which is paid into my UK bank account), after the french have had their share?  I'm feeling very confused again, and just when I thought I'd worked it all out!

 

Help.....!

Marie

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Yes, you're taxed in the UK too. However, they take account of the French tax that you've already paid. If what you've paid in France exceeds what the UK would charge then you've nothing to pay (I think this is normally the situation), if the UK tax would be higher, then you pay the difference.

 

Arnold

 

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This UK/France/worldwidetax situation has me really befuddled. I am not yet a resident of France but I understand that when I am I will have to pay tax on world wide income/interest/profit etc.  So if I sell the home I have inherited in UK I will have to pay Capital Gains tax .. Right??  where?  inFrance or UK?? but if I sell the house I have in Japan I will be selling it at a 65% Capital LOSS.  Does anyone know if I can offset the loss against the profit?  I asked a couple of the tax "experts" who advertise in LF a couple of months ago but as yet no answers.

Coral - nearly in ariege

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