Q: I recently purchased your help sheet on changes to French Income Tax returns and would like to ask a few questions. Briefly my personal circumstances are this; I moved permanently to France last September, I have an NHS pension paid into my French bank account and I have a small company operating in England and a small rental income from England. I am 60. Firstly I have been sent a form FD5 from the Inland Revenue in England and when I enquired they told me that this would enable the French authorities to tax my pension in France and the English tax would be waived. I would, however, pay tax in England on any company or rental tax earned in England. This appears to be at odds with the information in your help sheet which refers to world wide income. Secondly, there is no reference to Social Tax in your sheet. I have been unable to find out anything about it. Can you explain what it is and do I have to pay it. Thirdly I have received from the bank a form which they appear to want me to complete. It is headed Justificatif A Produire Aux Services Fiscaux (No 2561 ter). There are references in the accompanying explanatory letter to Declaration fiscale 2042, which you refer to on the help sheet. Can you explain what if anything I need to do with this form from the bank please.
Name and address withheld


A: From what you say, the form FD5 should now be returned with your first tax declaration in France, further to which the Centre for Non Residents in Nottingham should receive the English version of the form after about a month, subsequent to which they will confirm your residency in France and issue the relevant tax codings for income emanating from the UK that still remain taxable in the UK.
With regard to the taxation of your income, the information that you have been provided with seems slightly erroneous as your NHS pension will be taxed in the UK. Your UK company employed earnings should also be taxed in the UK, although this is more through tolerance than strict rules all of which are unfortunately far too complicated to explain in these lines but essentially if the work is effected in the UK then your salary should continue to be taxed in the UK.

Income

This said, you should be aware that if the 'control' of the company is effected from France, then the French tax authorities do, per the letter of the law, have the right to tax it.
UK rental income will also be taxed in the UK. The effect of all this is that the French will operate a system whereby they will calculate a theoretical tax liability based on your total income, being that income arising both in the UK and in France, but they will then ask you to pay only a proportion of this.
The proportion is the amount of income that is legitimately taxable in France, divided by your overall world income and, supposing you have no other income at all apart from that mentioned, it will result in no French income tax liability being due.
By contrast, should you have, for example, some UK bank interest, then the fraction will be this bank interest divided by the total world income (NHS pension, company salary, rental income and bank interest).
As to French social charges, these are similar to the UK national insurance contribution, but more widely applicable and certainly more financially penalising than in the UK.
There are in fact three separate charges, each one of which is levied - or not - depending on the nature of the income, but only where income is legitimately taxable here in France.
From the information you have stated, it would be levied on neither your NHS pension income, nor your UK rental income, and, depending on the actual circumstances of the taxation of your company salary, not on this either, if this is taxed in the UK.
On interest, dividends and other forms of investment income, the social charges, collectively, would amount to 11%. You should, however, also be aware that there is a further charge to which you will possibly become liable for a few years, and this is the charge for belonging to the French Health Service. However, there is an exemption from paying this charge if you have a form E106 (available from the UK Department of Work and Pensions) since this will ensure that your costs are effectively paid by the UK but the validity of the E106 is typically only for the first two years of residency in France. The good news, however, is that when you (or your wife) come to draw your UK Old Age State Pension, you can apply for an E121 which will exempt you from paying the healthcare charge during the remainder of your retirement. With regard to your third question, the form is in respect of income from stocks and shares, which, if you have any, evidently would need to be completed and returned as requested.
I hasten to delve into what to do should you have no stocks and shares as it is unusual for this form to be issued erroneously.