UK teachers pension - lump sum declaration

(Julie Elizabeth Butters 2) #1

Has anyone taken their UK teachers pension whilst being resident in France? (I moved here 14 yrs ago). I’m trying to get my head around the best option to avoid paying un-necessary French tax on the UK tax free lump sum part, from what I have understood from research the lump sum has to be taxed in UK because it is a government pension. If any ex-teacher has gone through this recently and can help me make head or tails of my options I will be forever grateful as my head is swimming with conflicting advice/info

(Graham Lees) #2


(Julie Elizabeth Butters 2) #3

??? Don’t understand Graham

(Patrick O'brien) #4

As an ex-fireman I am in the same situation as Julie and can assure her that her pension , including lump sum, is exempt from tax in France. The system for exempting it is somewhat complicated however , as it is first included in the tax calculation and then the tax is reduced by a credit equal to the extra tax calculated on it.
This is done so that the french tax rate for other french taxable income takes into account the total income.
Where a lump sum is involved , it could increase the tax rate significantly if simply added to the normally declared pension, so it may be advisable to declare it at 1AT on the 2042 and under “pensions et retraites versés en capital” 1AT at section 1 page 1 on 2047. This will ensure that the tax rate on the lump sump sum is fixed at 7.5% . If the lump sum is not huge , and your normal tax rate (shown on your avis) is well under 7.5% , best just add the lump sum to your annual pension at 1AL on both forms.

(Julie Elizabeth Butters 2) #5

Thanks Patrick - this helps - the lump sum is £34.000 , I understand I can divide this across 4 years - so just putting in 8.000 per year, not sure if this helps or not, normally we don’t earn enough to pay tax but this plus my monthly pension moight take us over

(Peter Goble) #6

Julie, I’ve been drawing a Teacher’s pension since I took early retirement from university teaching over 25 years ago, and when we came to France it was taxed here after being taxed in UK, so I was taxed twice. It’s down to HMRC to make the adjustment, but you have to claim it from them.

The situation was addressed by my completing a Form issued by HMRC under the Double Taxation Treaty between UK and France, and I got a tax refund of £3900 from UK to cover three years of overpayment.

You should speak directly with the UK people on the HMRC helpline they have set up to help people in your situation, otherwise you will go round in circles of bewilderment.

I don’t remember being taxed in UK on my lump sum, but it was in the early 1990s and things may have changed since then. Contact the Teachers Pension people on the phone, they are very helpful, I find.

(David Martin) #7

If it’s a Government pension, as those paid through Teachers’ Pensions are, it should be taxed in the U.K. not France Peter. There is an appropriate place to declare Government Pensions on the 2047. Lump sums are dealt with differently as, although they are tax free in the U.K., they are treated as income in France and therefore liable for tax. As Julie already knows there are ways to declare this to limit the tax to about 7%.

(Julie Elizabeth Butters 2) #8

Thanks everyone - it really is a minefield - my pension isn’t huge as it is and I dread losing so much if I don’t need to. Fortunately I am starting in Jan - so I do have time next year to get to the bottom of this before deciding where I need to declare - starting with HMRC sounds like a good starting point - throw Brexit into the mix and goodness only knows where I will end up!

(Patrick O'brien) #9

Best to take in £8000 chunks over 4 years and declare added to your normal annual pension (don’t forget to fill box 8TK) . Some of the posts on this thread are inaccurate -no wonder you are confused . I suspect Mr Goble was not directly employed by a local authority , as I assume you were, so his case is irrelevant to your situation.

(Paul Bradford) #10

Keep your UK bank account to receive your UK pension. I have kept my Lloyds account and notified them of our address when we moved, so statements are sent here.
By keeping the bank account you will be able to look at the most advantageous time to move your pension here via a currency broker, maybe in a lump sum of set up a monthly direct debit. In any event, most brokers will not charge for sending your money here, nor should the banks here charge you for receiving it. Be careful with your choice of broker as some will charge several cents per pound more than others.
My pension is local Government too (ex-Police) and is taxed in the UK yet bizarrely, on a couple of occasions, I have received a small tax bill here stating that I would have paid more tax had the pension been paid in France!

(Graham Lees) #11

That just doesn’t make sense.
Who issued the small tax bill?
Our State Pensions are paid directly to our French Bank account in Euro at the interbank rate (if not pretty close to it by HMG) but like you, we take our UK Govt pensions in sterling to our UK bank account and convert to Euro when the rate is most favourable. We found that the exchange rate offered by the 3rd party handling our Govt pensions generally less attractive.
That said, I can’t see how what you say works. The amount of your pension is what it is and if paid in sterling, you use one of the accepted methods of converting it to Euro for disclosure to the French tax authorities in your annual (French) tax return.

(Paul Bradford) #12

It was the Centre des Impots, via our accountant. I know that it doesn’t make sense, but their response was that the dual tax treaty applies when the tax would amount to the same in either Country, except when I didn’t pay enough. Each time (twice) it was around the €30 mark and the last time was a few years ago.
As for transferring the money using a broker, the one that we used for the first twelve years of so used to charge us about 5 cents per pound. This seemed to be standard until I was introduced to another company. Now we get around one cent off the rate. When we give the accountant our figures we used the published exchange rate for the year. We use an accountant due to the fact that my wife has a business in the UK. However, due to the fact that the some of the tax allowances (CGT for one) in the UK do not exist here, we have had a very large tax bill and my wife has been forced to become tax domiciled in the UK, as she will have a potential CGT next year.

(Graham Lees) #13

I’m not sure you can ‘choose’ where you pay your tax…
If you live in France, you have to declare all your worldwide income from whatever source.

(Simon Armstrong) #14

It’s not clear if Paul’s wife lives with him - i.e. is she French resident?

(Paul Bradford) #15

She was, until August of this year, now has to spend more time in the UK than here and prove it. So, at the moment she stays in the UK for half of the month.

(Anna Watson) #16

That could be a tricky one because under French law, even if she spends most of the year in the UK, as far as the fisc are concerned she is still tax resident in France if that’s where the family home (foyer) is, and she’ll still have to declare her income here as part of the household income.

(Simon Armstrong) #17

Ahhhhh the ‘number-of-days-game’ rears its head again! It’s been a while lol.

As Anna rightly points out - residency is not just about the amount of time spent in a country / countries… don’t fall into that trap, it could be costly :stuck_out_tongue_winking_eye:

(Graham Lees) #18

IIRC the rules for ‘residency’ are different in the UK (HMRC) to what they are in France.
Do you claim one part or two to the fisc? Don’t forget that you are taxed as a couple in France and individually in the UK.
You just can’t pick and choose (or have your cake and eat it!)
As a retired policier, I’m sre you came across individuals who claimed not to know it was an offence in order to escape justice… the same rules apply here - ignorance of the law is no excuse!

(David Martin) #19

I find it amusing that when hundreds of people are going to lengths to prove that they have been resident in France longer than their paper trails might suggest to facilitate them getting their hands on a CdS at least one person is prepared to use a bit of smoke and mirrors to save a bit of tax by ensuring that they are not resident here. Didn’t Al Capone try something like that?

(Ann Coe) #20

Why not do the most simplest thing of all , actually go and visit the bureau des impôts youself !

I find it strange that you would leave this to an accountant and even stranger that they would talk to him and not to you directly.

They are quite approachable, better to make an effort and have a chat with them than to end up making a costly mistake.

I made a mistake on my mum’s tax return this year, only spotted it when the paper copy arrived from them, stating that a rebate had been made !! I went to see them straight away, we found where I had gone wrong, filled in another form there and then, no penalities just understanding that these things can happen, what’s more they thanked me for my honesty and quick reaction. Phew ! :slight_smile: