Has anybody been in this situation and if so what was the conclusion?
We had thought that if we sell our English property after moving to France and after just over a year being resident for tax here that we would still only need to pay UK cgt. It seems that we might have to pay French cgt instead. Advice and guidance particularly in light of recently introduced changes in both the UK and France are ambiguous. As our only residence in the UK for the past 18 years we expected to pay a small amount of tax due to it being rented out for the last 16 months. In France however the tax, whilst higher, has 78% relief but the relief on social charges is less beneficial and the amount due becomes substantial.
Has anybody recently sold their UK property whilst being a tax resident in France?
Any assistance would be greatly appreciated.
Has anybody been in this situation and if so what was the conclusion?
Thank you all for your contributions. Our (paid) financial advisor has now produced a report and we will consider the next steps to take.
The point about tax residence is that you can easily be within the residence qualifications for both countries but you can actually only be tax resident in one. At its simplest, if you spend more than 183 days in a calendar year in France you will, on the face of it be tax resident. On the other hand if, as a previous UK tax resident, you spend more than 90 days (depending on various factors the number may be higher) in the UK in a tax year (April to April) you will on the face of it remain UK tax resident. The double tax treaty provides what are known as tie breaker rules to decide which one dominates. Wherever you are resident, you may still be liable for tax on some income or gains in the other country but there will generally be some sort of set off. It is not a simple area and this may not be 100% accurate!
As I understand the position, if you were tax resident in France when you sold then French tax (and possibly social charges) are payable. Until April 2016 there would be no UK tax, as non UK residents do not pay UK CGT. After that there could be and it would be offset against the French tax. As the French main residence exemption is not time apportioned and only applies if the property is your main residence when you sell, you may be in a worse position under the French tax régime.
You will also need to look at exchange rates when you bought and sold as the French tax will be based on the gain in euros.
It sounds as though you need advice from a specialist in French tax. I looked into this when we moved and made sure we had exchanged contracts on our UK property before we became French tax resident.
I don't get advice unless I ask for it, I just hand over any information to professionals that I am asked for and you can be reassured they have saved us far more than we have paid them. I try not to give advice either, just suggestions and enough information for someone to do their own research. I will no longer contribute to this discussion as all the information/misinformation, which I no longer need as I have sorted CGT for the time being, is on the internet.
Tax issues are always complex and that is why you should take professional advice - which is what I advised in my first reply - Nigel wanted a personal advice/experience response which I gave him. I have had for years, and still have a UK accountant and separate financial advisor and French accountant and so enjoy reading but never totally depend on what is written by anybody in a chat room or on a web site - who knows who is misinformed or abbreviated too much.
I think you need to read again what Simon has said and also the link I posted in a previous post. Here it is again http://www.french-property.com/guides/france/finance-taxation/taxation/liability-income-tax/residency-status/
Residence is such a complicated issue that you can't reduce it to simple numbers. Intention and "economic interests" have to be considered when deciding whether someone is resident in France.
Also, what you declare to a financial adviser is irrelevant. Your local French Tax Office will decide your residency status based on your particular circumstances - it most definitely is not your choice!!
I hope you are not basing any financial decisions on your incorrect assumptions. You could find this very expensive indeed. Please get better advice.
Good afternoon Nigel
Obviously I know nothing of your personal circumstances but, depending on the amount of tax/charges involved and how settled you are in France, you may want to consider returning to the UK for a while. This will mean breaking any economic ties with France, including selling any property you may own here, and, I would imagine remaining in the UK for at least a full calender year. Your adviser is clearly the best person to speak to about this from a French perspective.
From a UK perspective you would only need to return to your old house for a few months to re-establish it as your principal private residence. In my old life as a Tax Adviser I used to advise that 3 months would do it but longer is more convincing! Again, you should speak to a UK tax adviser/accountant for advice specific to your circumstances before you take the next move (particularly as I haven't worked in this field for 8 glorious years).
Also please be wary of people on forums such as this that think they know the answers (including me, of course!!!). It would be unwise, and potentially very expensive, to act on their advice without getting it properly checked first. But you know this already!
Once again, I wish you the best of luck.
Melissa - I'm not sure where you're getting your misinformation from?
'You will be telling your financial advisor the day you arrived to stay' - well that very much depends on whether or not you have one! How do you think your financial advisor declared your French residency Melissa ?
As for when residency started - it's not a 'choice' of date - it is legally the date you arrived with the intention of staying. It's not a game.
The 183 day rule is much more complex than you indicate Melissa and is by no means the only factor that determines residency. You can spend considerably less than 183 days / year in France and still be classed as resident for tax purposes - as I've already stated above.
Yet another reason why anyone in any doubt should take professional advice!
You will be telling your financial advisor the day you arrived to stay. If you already have a holiday home here in France and one in the UK and went to stay temporarily in your French house then decided to stay then you will be able to declare what day you consider yourself resident from - day one or day 10 or 3 weeks later. This is perfectly possible if you have fully furnished UK and French houses. If you spend 183 days per calendar year (6 months) in France then you are deemed to be resident for tax purposes. I like the word "intention" - who knows what will happen in the future.
Melissa said - 'You become resident for tax purposes in France from the "day" you declare you arrived'
Simply not true. I guess this is the problem with forums where a little knowledge can be dangerous.....
Legally, French residency can in fact be assumed if you remain in France for just 3 months with the intention of staying longer. However, it's not the only criteria - much of which is based around your easily proven centre of economic interest (i.e. property, work, family, wealth, phone use, bank use etc etc). It's not just about counting days here and day there......
I'd love to know who you 'declare' your arrival to in France! I can just visualise it now.....:-) Hello I'm here..!!
Steve - you've engaged a financial advisor, who I guess is registered and qualified to advise on all things French. You've done the right thing - stick with it !!
Here goes: If you rent out a UK property so that you are unable to return to it while it is being rented out you have to be very careful even if it was your UK primary residence. You can only rent it out for a certain length of time before it will attract CGT when you sell it. If you just leave it empty then as far as the UK is concerned it will eventually become a second home after a certain length of time. Check all this out on websites or, preferably, with a UK accountant. You become resident for tax purposes in France from the "day" you declare you arrived. France has their CGT system and social charges (these are under debate - still I think, if you are not relying on the state for health etc.) which is about length of ownership of property. The day you leave France to return to the UK you are out of the French system. We lived in France from 2011 to 2013 and returned to UK for a year, having given notice to tenants, just to sell our UK house so that we were only under the UK CGT tax rules which say if it is your primary residence when you sell then no CGT. It may be wise to talk to a French accountant (we have one still) and they may be able to reduce the tax burden for you. Good luck.
We have engaged a financial advisor but was looking for some recent actual experience if it is/was available.
Why don't you contact a French accountant? He/She can deal with all your tax affairs and answer your questions.
Hi Nigel. I am no expert on this matter but I think it would be in both our interests for you to contact me privately regarding property matters and finance. If I mention Uckfield and IMM LE PRARIOND and you note my name, you will see that I have certain information that might help you. It is imperative we communicate as the information I have will help both of us. I could make this a more general post but I feel you will want to talk this through first. Sorry to be vague, but I can say no more publicly at this stage.
Regards , Nigel.
This is the link that Mandy sent but thank you for your help.
This may help to clarify http://www.completefrance.com/living-in-france/capital_gains_tax_in_france_explained_1_3850864
Thanks again Mandy.
You do seem to be confirming our worst fears which then begs the question what is the minimum period and/or criteria for being a UK tax resident with no French liabilities. These are the questions we have put to our advisor. Thanks for the link.
It seems to be resting on where you are resident for tax purposes. I think this is what you need to establish first and the rest will then follow. This might help http://www.french-property.com/guides/france/finance-taxation/taxation/liability-income-tax/residency-status/
The UK position seems to be pretty clear. Provided you sell before 6 October 2016 (exchange of contracts) you should have no UK tax pay. If you sell after that there may be a small capital gain (only the gain arising after 6 October) and you will have your annual exemption available (presumably??) to reduce that gain even further. If you jointly own the property the exemption will be £11,100 each (for 2015/16).
Out of interest I have done some brief research on the French tax position which is explained succinctly here http://www.completefrance.com/living-in-france/capital_gains_tax_in_france_explained_1_3850864
If you have been living here in France for about a year then I think you are probably going to be paying both CGT and social charges in France. Although there are taper reliefs for both which I guess you already know about.
In hindsight I expect selling your house before leaving the UK would have been the best thing to do for tax purposes, although I guess that doesn't help to hear that right now!? Maybe you should contact the tax adviser who wrote the property tax article, the firm he works for is well know in France.
Sorry I can't give you a definitive answer, hoping someone on here with experience of this will answer your questions for you.
Yes your quite right Mandy. It leaves the residency issue and who gets the cgt ( and social charges).