one of our friends is becoming resident in France soon. She has no pension as such and derives his income from a fund made up of ISAs and VCTs. This fund is worth around £600k.
How would this be treated by the French Tax authorities? In the UK because both are tax free savings she dos not enter them on a tax form.
Not sure about VCT, but you pay tax here on ISAs. Given the ridiculously low interest rates we cashed ours in, moved the money over here and put it in assurance vie, which is tax free here.
Thank you for the info I ahve tried to contact BLEVINS FRANKS but have ha no response I assume they are on their August Holidays
These are share ISAs like Unit Trusts and all the income is automatically reinvested. I understand that the ave gross rate of return is around 5%.
So sounds like they would be taxed in France then. But that return is about the same as assurance vie then, which is tax free here and also escapes french succession rules.
With Blevin Frank make sure you know exactly what you will be charged for advice. i have heard they are very expensive.
Be careful with the ‘tax free’ idea - all funds held in an Assurance Vie are free from Income and Capital Gains tax. Only withdrawals will be taxed and this taxation will not be imposed on your original investment; just the capital gain.
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ISAs once you move are just a “Unit Trust” to the French so they lose all their tax advantages. As above the closest thing in France is an Assurance Vie - its complicated to do all the ins and outs but they do offer a lot more tax benefits than your ISA will.
The VCT … depends if its a good one or not - the main advantage to a VCT was to reduce tax on what went in assuming you held them for 5 years (I think…) in the UK and the returns on most weren’t great - they really were aimed at reducing 40% tax when you first invested - the French don’t really have an equivalent. The obvious problem is if they’re less than 5 years (?) you lose the exemptions in the UK - but equally you’ll be liable on gains once you reach France. You probably need advice on these - my best guess would be … get them to 5 years and then sell them and take the hit in France on gains (whilst your resident- although most VCTs made bugger all gains from memory)
Yes, you are right. I should have explained the full situation.
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VCTs are a nightmare for non-residents, since according to my tax adviser the dividends are only non-taxable for residents. The UK will start to tax the dividends once you become non-resident, and they will also be taxable in France.
I sold mine when I moved.
I have had a look at her VCT portfolio which was started during 1999-2001. In the 20 odd years they have provided a tax free income of around 7% and are currently worth around 30 % more that they cost. My rough figures show that the investment has just about beaten the UK housing market and the 40% sheltered tax liabilty has now gone and The property would be subject to CGT.
Having gone through all the figures with her I estimate that if she keeps her UK investment then she will be liable for an additional £15-20k tax and social charges per annum making a move prohibitively expensive.
Ouch!