Selling French house - UK CGT?

[Tonyb]

As I am in the process of selling a French house I will have some French capital gains tax to pay.

In my naiveté I thought that once that was done I could pocket the rest. Of course this is wrong! If you are a UK resident and your French home is simply a holiday home then the UK Inland Revenue will also want their cut!

I just wondered why this is never mentioned in any article on buying French houses? All the information I've seen celebrates the fact that French cgt is only 16% but no one mentions that in effect this is totally irrelevant because the UK tax authorities will take the rest to bring the tax level up to the UK level.

It appears that once you declare the French house sale to the Inland Revenue you have to start from scratch - it's assessed as if the house was sold in the UK. All tax owed is calculated at UK rates and any tax already paid in France is then credited against the tax owing in the UK.

So yes, you pay your 16% in France but then you have a nice surprise waiting for you - cgt in the UK is 40% and the revenue will do their best to reclaim this, so you have gained nothing. Similarly, under French rules if you sell your house after 16 years you are free of any cgt liability in France, but what about the UK liability? Would the Inland Revenue then move in for their cut?

I really think this issue should be alluded to when discussing French tax issues in the various magazines, but I've never seen any mention of it.

Of course I could be completely wrong (I hope I am!).

[Lizzie15]

What an interesting item. I assumed you just paid the French tax! You are right,it would make a very good article.If we had to pay 40% it would be a wholly different can of beans!!

 

[LesLauriers]

You may pay 40% but you do get to keep 60%!

As a colleague used to say "you never make a loss when selling at a profit" so just be glad you have tax to pay!!

[BJSLIV]

We assumed that......

If you are tax resident in the UK then you pay tax on worldwide income in the UK.

Simple really!

If on the other hand you are tax resident in France you would be liable for French CGT plus social charges that would bring the deduction up to 26%, which would be more than you would pay in the UK unless you are liable to 40% income tax.

 

 

[Judie]

It's actually 27% that french residents pay.

[rico]

You can then offset your UK CGT allowance against the remaining 24% which should bring it down a little, depending of course on how much profit you will be making!

[Tonyb]

[quote]Hello I wonder why you would mention your french house sale to the inland revenue. Regards John[/quote]

Although it's tempting not to, I think it would be a dangerous strategy. The French tax agency ask for your latest Inland Revenue tax demand in order to confirm that you are not based in France for tax purposes and to prove that they can only charge you 16% as an EU citizen.

However,I have read that due to the agreement between the French and UK tax authorities the French inform the English about any such transactions.

I suppose one could not declare it in the UK and then if it ever came to light just plead ignorance to the Inland Revenue, but it's risky!