Tax implications selling our house in UK

My wife read somewhere that we have to take care when selling our house here in the UK. Is there some potential for having to pay tax in France on the sale if we are, at that point in time, resident in France?
We aim to rent a property in France in time to apply for residency before the end of the transition period - preferably some months before to be safe. We are primarily concerned about sorting out healthcare in time (S1 etc). My wife will retain FOM after Brexit but nevertheless the deadline for health care will remain. It’s unlikely we will had sufficient time to be sure where we wish to live by then.

I’m sure someone who really knows… will chime in… but I think (thought) that so long as you are seen to be in the throes of selling your UK property (which would have been your Main Residence when you were in UK)… then it should not have tax implications when the property is finally sold.

I think there is a timescale of leeway… (1 year perhaps) to get the property actually sold… but you might have to prove that it has been advertised/available on the open market … in order to avoid any sort of taxation from French side of things.

that is the rough gist of my understanding… but… as I say… others will probably be able to flesh out these bones… (and I’m not sure if Brexit changes anything… aaargh)

Tax is very twitchy… my thoughts may well NOT be up to date…

If you have an EU spouse I really don’t know why you’re worrying about Brexit at all.
https://www.service-public.fr/particuliers/vosdroits/F19315

EDIT - yes I do, it’s just occurred to me that you want an S1. I’m a bit slow today…

Yes, you want to have sold your house while it still qualifies as your principal resident and no capital gains tax to pay. There is a system of tax relief once you have become non-resident, here

BUT, once you are non-resident in UK and tax-resident in France then you have to pay French tax. In France your main residence is also exempt from capital gains tax, and the fisc usually grants a leeway of about a year to allow for it to be sold. I guess renting, rather than buying in France might help that as long as your house is actually on sale.

This is such delicate ground that you do need to take professional advice to be sure where you stand. Capital gains tax here on a second home is 36%…so you don’t want to risk it!

We found out by chance whilst living in France but with our former UK home to sell that (if I remember correctly) whilst avoiding capital gains through tax we would still have been liable to pay social charges. This could have been over 30000 euros. From memory, and it may have changed, length of ownership of the property was a factor but I think there were different rules for tax and social charges liability. So, I’d definitely suggest taking proper advice. We avoided the problem by reverting to living in the UK but length of time away from the UK also had to be taken into account for UK tax purposes. Good luck!

What are ‘social charges’ in this context Kevin?

A further 17%!!!

If you mean What are they for - they’re a tax by another name. There are two components, CSG and CRDS. CSG stands for general social contributions and the money goes towards funding the health service infrastructure and a quite surprisingly wide range of other social benefits. CRDS goes towards paying off France’s national debt. Levied on most types of income if you live in France, with certain exemptions.

1 Like

Introduced as an “exception” that became the rule…

I agree with the suggestions that this is an issue over which it is worth paying for specialist advice.

We have a UK house that we used to live in, but more recently rented.
We took specialist advice before we moved a year ago, and as a result knew that we would be liable for the french equivalent of CGT on this UK house, if we did not sell it within the first year. (Unhappily we have not!).
We would then also be liable for Non Resident CGT to the UK as well, although mitigated by the double taxation treaty.

I worked out the differences. The more valuable the property, the worse it seems is the difference! Selling it before we left would have triggered a fair amount of UK CGT, but allowances took that back down. As a result we will probably pay slightly over twice as much actual tax in France .

Selling it in the next year or two is however somewhat mitigated by tapers on the French tax, which apply if you have owned the property for some years. As I understand it there is a tapered relief on both French CGT and the Social Charges, after the first 6 years of ownership. The taper relief on CGT takes the CGT to zero tax after 22 years of ownership. The taper relief on the Social Charges takes it to zero tax after 30 years!

The bigger issue is if you have carried out improvements since purchase. I suspect Notaries will reluctantly accept bills for works from UK builders who were registered and limited, but not costs of materials etc if not funneled via such a builder. Otherwise, there is I understand an allowance of 15% of the purchase price that can be charged for improvements, provided you have owned the property for more than 5 years.

If the final capital gain liable to French Tax is more than € 50,000, then there is an extra charge on a sliding scale.

So in fact, the longer we keep the UK house before selling it, the better the effects of the taper.

There are details of these %ges and charges at
https://www.service-public.fr/particuliers/vosdroits/F10864#N10150

Now that is useful, thank you!

It never occurred to me that the taper would apply to a property outside France! Or that any allowances for improvement works would even be considered. That could make a big difference. Let’s hope this is an exemption that stays that way for a bit as we have no plans to sell UK flat just yet since occupied by family members.

I gave my share of my late mother’s house to my nieces a while back, and reported it to HMRC within 30 days as required, wasn’t charged CGT on the gain since she died although my sisters were. It wasn’t a very big gain tho’!

Lets hope you live beyond the seven year tax free gift period. :wink:

Yup! :crossed_fingers:t3::crossed_fingers:t3: So stupid, we should have varied her will and done it straight away but none of us were thinking clearly.