For the British Nationals living in France.
Following our Live Webinar on Taxation in France and UK here is the full session for viewing at your leisure
Maître Cédric Rivière: – Consequences of Brexit on income tax and social contributions. – “Carte de séjour” application and tax residency.
Mr. Gerry Sims: – Requirement towards HMRC: what to report – UK versus French taxable income. – UK capital gains tax regime and new online reporting requirements. – VAT status of services between UK and France.
Additionally we received a number of questions from FBN Members, for which we are posting the answers here:
Questions for the Taxation Webinar- 24 March 2021
Q1 What is the tax situation with regard to private company lump sum pension payments from the UK – specifically where you have the possibility to take 25% tax free from your total pension pot (in the UK). How is this treated in France – is it also 100% tax free, or do you have to pay tax and/or Social charges on part of all of it in France, and then can you reclaim the amount of tax under the double taxation treaty? And which section in the tax form should you put this amount?
If you are FR resident the 25% tax-free element does not apply. The lump sum needs to be declared in FR and is treated as general pension income and is taxed according to your personal circumstances. You can apply for a refund of any tax paid in UK.
There are special rules in FR if you withdraw the whole pension fund, but not for a partial lump sum. If you want the special rule to apply (7.5% income tax fix rate), indeed, the lumpsum must be a final payment of the pension scheme. In addition, you must be able to prove that the pension contributions paid during the contribution period were deductible from your taxable income and therefore not initially taxed.
This format is too brief to allow detailed advice on how to complete the form entries.
Q2 We have recently taken French residency and registered for French health care. We are retired. We each receive a UK State pension; we each receive a UK employer’s pension; I receive small amounts from two private pensions; I receive small dividend payments from some shares; my husband receives small amounts of royalties from books he has written. I do not make a tax declaration to HMRC but my husband, who is still officially self employed as a writer, has until now submitted a self-assessment to HMRC via an accountant. May we continue as we are, or must we make a declaration to the French tax authorities?
You are now FR tax resident so all this income is taxable in FR and must be declared here. Your husband’s self-employment technically ceased when he left UK and he must register under a FR business regime. He may need advice about this.
Q3 My wife and I transferred our residence from the U.K. to France on 28th December 2020 arrived in France on that date. We have applied for residency and access to the healthcare system from that date.
Will it be necessary for us to submit a tax return for the period from 28th to 31st December 2020, or can we register in the tax system from 1st January 2021 onwards? There will be nothing to put on the return in 2020 given the short timescale
France is using the split-year for taxation and these people should file even for 2 days. Indeed, this would give them the benefits of establishing residency for BREXIT before 31/12/2020, but also they would have to declare their foreign accounts/life-insurance contracts for 2020… even with a NIL tax return.
Q4 My wife and I left the UK to live in France in August 2020 and since then have applied formally for residency and although we await official confirmation of that acceptance, we do now each have our carte vital as the first stage. As a result of this process, we will be required to submit a tax return in France.
We both have stocks and shares-based investment ISAs that we have held for many years as tax paying UK nationals and residents of the UK. We understand that as French residents we can continue to hold the ISAs and withdraw from them as required. We also understand that we cannot invest further in the ISAs as French residents but that the gains made routinely by the fund can be invested into the fund, as we have always done.
Our question is – how should we report Investment ISA “income” on our French tax return and what documentary evidence will we need to support the details?
You must forget the ISA wrapper and report the income as normal dividends, interest, gains etc. The wrapper is invisible to FR tax. I would also say that the calculation of the gain can be difficult with the French taxation rules of capital gains, so it’s important to seek advice or assistance for the filing of the French tax return.
Q5 Having applied for a Carte Sejour at the end of December before UK Brexit cut off and with a Prefecture interview confirmed in mid-April, what date does my French tax onboarding start from and when will my first return need to be submitted? Does the double tax agreement between France and UK mean it starts on either the day of Prefecture approval or the end of the UK financial year on 6 April 21?
The date you became FR resident which for most immigrants is the date you set up home in France having moved from UK.
Q6 My question concerns taxation due in France due to rental income on UK properties. I believe I am legally obliged to pay this to UK tax authorities. Do France/UK have double taxation agreement post Brexit?
Yes. This was discussed in the webinar.
Q7 Comme beaucoup de britanniques, le moment exact ou je suis devenue une residente de la France est difficile a determiner. Pour moi puisque j’ai demenage peu a peu on pourrait dire qu’a partir de 2013 j’etais devenue residente (ou meme avant). Mais on pourrait aussi dire 2017, ou a l’extreme 2020. (J’ai achete ma propriete a mon partenaire en 2011.). Ce qui me fait des inquietudes, c’est qu’ayant de tres bas revenus generalement dans ces annees, ayant tout en regle en Angleterre, vu le niveau de mes revenus je suis plus ou moins sure que je n’aurais eu rien a payer comme impots revenu / charges sociales en France. Je faisais des CDD a intervalles – toujours en Angleterre, jamais travaille en France, toujours des revenus annuels en-dessous du seuil francais de devoir payer des impots francais sur le revenu apparemment. Je ferai ma demande de carte de sejour aussitot que possible en mars. Je me crois residente depuis 2013. Est-ce que le fait de n’avoir fait aucune declaration pour les impots sur les revenus sera un probleme? Meme en etant plus ou moins sure que le niveau de mes revenus n’aurait pas requis de paiement de ce type d’impots ni des charges sociales pour les annees intervenantes? Quant aux taxes foncier et d’habitation tout est en ordre payes tous les ans depuis 2011.
Sorry if I’m not writing it well in French – even though I know I dont owe any taxes, is the fact that I did not know I had to make a tax declaration each year in France as well as in England going to cause a big problem if I now submit my carte de sejour application under the withdrawal agreement as resident since 2013 when in my heart I regarded France as my residence?
I do not think I have the energy this year to continue with my cpam/carte vitale process, open my carte de sejour process and encounter new enquiries from French tax officials as well!
Sorry, I don’t think we can answer that. The prefecture will decide CdS criteria. I will also say that filing a tax return even for no or small income is a requirement as long as you have foreign accounts or life-insurance contracts. More than this, it’s often a good thing if you need to claim some benefits in France.
Q8 if no one else asked a question about UK private pensions there is one thing I am wondering:
Are UK private pensions (‘ defined contribution ‘ such as SIPP, or AVC attached within an employer ‘defined benefit ‘scheme, protected from French capital taxes so long as income is not taken from them?
Is this the case for capital gains made by assets that continue to stay within those schemes and dividends that are retained within those schemes and not paid out to the individual residing in France? assuming UK domicile kept
Dividends are always taxable, even if re-invested.
Q9 I am retired and hope to apply for my carte de sejour aiming to start my tax regime in France from April 1st 2021. My question is as follows:
I have ISA cash and stocks and shares in the UK that are tax exempt as a UK taxpayer. I realise that these will no longer be protected when I am a tax payer in France and any income, they generate will be taxable.
What happens if I sell shares and stocks? Will capital gains be taxed from the date I become a tax payer in France or from the original date of their purchase. For example, many of the stocks and shares I bought 25/30 years ago and their value has increased over time thus the capital gains in these cases will be more substantial with a greater tax liability.
There is potentially a fundamental error in your first sentence. Your FR tax regime starts from when you become resident not when you choose. Maybe you are arriving on 1 April 2021 but it doesn’t sound like it.
Regarding gains you will be taxed in France for the full period of ownership, under FR rules.
Q10 My UK University Pension is paid directly into my Bank of Scotland Account each month – net. Thus, my PAYE deductions have been taken and UK tax rules applied. Thus, I do not pay any further tax here in France on my pension.
After the end of 2021 will the same arrangement still hold?
Tax wise would I be better off registering here in France for Tax purposes. I just have my monthly pension as income
The tax rules in this regard do not change after BREXIT. This was explained in Cedric speech;
However you should still declare this income (and all income) in France.
Q11 My husband and I have a jointly owned house in England. It was purchased as our primary residence during 2009 and we lived there for about a year, since then it has been let. As the mortgage expires in 3 years, we are looking at selling it in 2022 or 2023 in order to release some cash. Can you advise how this should be done to ameliorate the tax impact. We are tax resident in France since July 2020 but continue to pay UK tax on income from this and 2 other UK rental properties. If you need detailed figures please let me know, we paid and a recent valuation we have a profit of 129K
We cannot provide specific tailored tax advice under this format. However UK residential property sales are taxed in UK and then in FR with a double tax credit. There are very complex rules in each country and tight deadlines so I recommend you take professional advice before you sell. Contact me by email.
Q12 Several UK people I know who have second homes here are beginning to wonder if they should get French residency to give them more freedom to come and go (when times get back to normal). If one wants to stay for more than 180 days at a time, they will have to do a French Tax Return.
No! Cédric explains tax residency which is not only the 182 days rule!
They need to know how much that will cost them before making a decision. Can one of your speakers calculate how much this would cost, using a made-up example, because of course their property and investments in England (and elsewhere) will be taken into consideration.
Example: A retired couple have a house in UK worth £500.000 and investments worth £20,000 (capital not interest) and pensions (private and state) worth £3000 a month each, ie £6000 together (6000 x 12 or £72,000 p.a.). Calculating at the current rate of exchange could a speaker calculate the tax they would have to pay as a couple were, they to have to do a French Tax Return. Let us suppose that they do not make any income in France, but own their French house.
I know this is not necessarily realistic but listeners could estimate roughly what they would have to pay themselves, up or down the scale.
This subject is too broad for this format but we would be happy to advise individually for specific circumstances.
Q13 Can someone explain in general terms what French Tax Returns take into consideration and what % on “foreign” sums (montants) has to be paid, if they don’t want to use the above example. Many people did not want to become permanent residents for this reason and got away with it, coming and going as they wished, but now they can no longer do that.
I’m afraid this is impossible to answer generally. The complexities are too great. I would say in general French income tax is lower but social security costs are higher. See comments above about specific circumstances.
Q14 I am retired and residing with my cohabitation French partner. I am seeking a residency permit which was registered before 31/12/20.
I am selling my house in the UK and want to put part of the money into a jointly financed home in France.
Can you advise on the likely tax regulations please?
You will need to declare the gain in UK and France but there are reliefs and allowances available. I would suggest getting professional advice well before the sale.
Q15 I have inherited from my late father’s estate in the UK (mainly from the sale of his house). The total is below EUR100,000.
I have permanent residence in France (Titre Sejour withdrawal agreement) and Tax resident in France. I am in process of transferring my inheritance to my french bank account from HSBC UK. What documentation do I need to supply to prove source of funds to impots.gouv.fr and am I right in understanding that this is below the french inheritance tax threshold? (UK & French bank accounts have been declared to the fisc). My boyfrend also received a similar amount of inheritance from his mother (paid direct to his french account by the solicitors) He is also fully french resident and tax resident. I guess the same applies to him. Both parents died last year we received inheritance this year after completion of our late parents’ house sales.
Can I continue to hold a savings account with HSBC UK? I believe they hold an EU license.
As long as the beneficiary of inheritance is FR tax resident, it is taxable in France. The inheritance tax return (even if less than the 100K€ tax-free for children) have to be filed within 12 months of the death. Any UK tax paid will be offset as tax credit against FR tax.
Q16 I receive an HSBC staff pension to my HSBC UK account (declared as Reveus de souce Etrangere) and am an auto entrepreneur in France. I have changed my address on the UK Government Gateway to my french address. Is this enough to tell the UK I am no longer resident (or UK tax resident) and ensure they pay my correct state pension at 66 as per the withdrawal agreement (resident in France before 1 Jan 2021)?
No, changing your address is not enough. You need to submit a Form France Individual.
My understanding is that BREXIT nor your residency affect your state pension
Q17 I own a vacant flat in Perigueux which I intend to sell (Covid crisis permitting). Will I pay the same tax as a French person or do I get taxed more as an immigrant?
If you are FR resident you pay the same.
Q18 We are early retirees (one with a British passport, one with an Irish passport) and own a home in the UK. We have been renting and living in an apartment in France since 2020. We will be spending more time in France than the UK so have applied for our pre-Brexit French residency cards. We estimate this will be the situation for at least 5 years, but it could become permanent or in the event of a family crisis (hopefully less likely), we could return to the UK sooner.
The residency should be advised by a professional as it is more complex than just spending more time in France than in the UK…
Q19 Our question is about investments. We have private pensions and savings invested with a UK investment management company via an IFA. We also have cash savings which we were planning to also invest in the UK via the same IFA and investment management company. The IFA has said we can leave our savings and investments in the UK, even though we are becoming French residents (not French citizens).
- Is this legal (even if not tax efficient)?
Yes.
- What are the tax implications (French and UK) if we do leave our money in the UK, and what would be the alternatives you would recommend looking into?
Your investment income and capital gains are taxed in FR if you are FR resident in the year you sell or in UK if you are UK resident
Your IFA would need to advise about alternatives. We are not able to by law.
Q20- We arrived in France on December 30th with the intention of becoming resident and reserving our rights under the withdrawal agreement.
We sold a property in the UK on 8th February that was not our principal residence. Will we only be responsible for Capital gains taxes in the UK? Will there be any social charges to pay in France. My husband has partially owned the property for more than 30 years but it has only been in joint names for 6.
Yes, and you must also report the sale under the UK non-residents capital gains tax regime within 30 days of completion.
Q21- I still have time to apply for WARP residency. My reality is that I live and work between France and the UK. Because of Covid I am stuck in the UK and I do not know when I can get to France (my mother is 86 in London and with borders closing and quarantine etc, I cannot risk being stuck in France if she needs me). I hope to apply for WARP status (I have a microentreprise, a house rental and am waiting for my notification d’affiliation for healthcare). But I have no idea how long I will spend in either country and the rest of Europe after lockdowns. Currently I am working virtually in Europe from the UK. My tax questions include:
- If I apply for French residency, but because of Covid and lockdown I spend more than 6 months in the UK, where do I pay tax?
- Is being tax resident different from legal resident?
- When my mother dies I understand her estate is taxed in the UK, but I get mixed messages about whether I would also pay some tax in France, is that so?
- Even if a French resident, I pay English tax for my Ltd company. And then French tax on everything else?
- I have money in the UK bank accounts, do I pay French tax on that, or just declare it?
- I have ISAs, I pay 30% on that? Would that be from January 2021?
- Is there flexibility concerning what is effectively dual residency?
You really need to take professional advice as your situation is quite complex to answer in this format
Q22– Is it possible to be resident in France but tax resident in the UK?
Yes but I would add it is not either/or. You will possibly be tax resident in both.
Q23- Is income earned working remotely in France but for a UK based Company and taxed in the UK taxable in France?
It is not taxable in UK if you are located in France when working. It is taxable entirely in France. You need to take advice.
Q24- Myself and my partner are wanting to move to France this year on a permanent basis – we have been planning for some time. However, it is really unclear what our situation will be.
We are still of work age and want to continue working whether that be for a French company, a British company but based in France or self-employed.
We also own an apartment in France with French mortgage and French bank account. The apartment we have owned since 2005 and we plan to pay off the mortgage with a small amount of equity from our UK house. We have rented the apartment this year for the first time and Emma, my partner, will be doing a French tax return this year to represent that rental.
Could you please advise in broad terms what we should be looking to do for the best. Obviously we can’t do much until Covid settles.
It really depends on the detail of the circumstances. Without that detail no-one can advise so you probably need to consult a professional, lay out your plans and where you will be working then we can explain the tax implications.