How to contest UK bills

Some tax offices are still wrongly levying tax on UK “government” pensions and rental income

8 January 2014

SOME tax offices are still wrongly levying tax on UK “government” pensions and rental income, despite assurances that this would not happen this year, readers report.

The problem relates to pensions of people such as retired teachers or civil servants (not UK state pensions), and incomes from UK properties that are rented out by tax residents of France.

In spring the central French tax body the DGFiP confirmed to Connexion that, under provisions in the UK/France double tax treaty, these incomes are assessable for tax in the UK and, even if no tax is due because they are below the threshold, neither French income tax nor social contributions (CSG, CRDS...) should be levied on them in France.

You can see this email at www.tinyurl.com/taxadvicephoto
The information originated from Sous-direction E. Prospective et relations internationales.

Due to the treaty articles - rental income (article 6), government pensions (article 19) and double taxation (article 24) - these incomes attract a French tax credit, erasing French tax which would otherwise have been due on them. This includes social contributions, which are specifically included as a kind of “French tax” in article 2.

Connexion’s discussions with the DGFiP hinged mainly on whether “subject to UK tax”, mentioned at article 24, meant “actually taxed” or just “capable of being taxed”; the answer was that the latter applies.

The treaty is here: www.tinyurl.com/taxtreaty-English (/tax-treaty-Fr for French).

A DGFiP spokesman said if your tax bill is incorrect, you should contest it to your tax office. He could not confirm if the DGFiP has briefed local offices, notably in areas with a lot of English-spea kers, as officials had said they planned to, but he said the offices are “sufficiently aware” of the treaty to decide correctly if readers point out mistakes.

If you think you have been wrongly assessed we suggest an informal query by email to your tax office: Go to www.impots. gouv.fr click Contacts at the top – put in your address and postcode – click on Service des impôts des particuliers to find their address.
This worked for reader Stephen Collier (see
Letters, page 16 of the October 2013 edition).
However, if it fails, apply by recorded delivery post (lettre recommandée avec avis de réception) stating that you contest all or part of the tax, providing copies of supporting documents (eg. the avis d’imposition).

You have until the end of 2015 to contest this year’s (2013) bills and until the end of 2014 to contest last years’ (note that the tax treaty was in force then too.)

The safest option is probably in most cases to pay the bill by the required date in the meantime, though if you wish you may ask in the letter for a delay - sursis de paiement.
This is automatically allowed if the sum is less than €4,500 (above this, security may be
required).
If, however, you do this and you are not accepted, there will be late payment penalties. There is more on contesting bills, plus links for applying to mediation and conciliation services should the application fail, at: www.tinyurl.com/Contesting-tax-bill

Please note that even if the tax office has worked out your tax correctly, it can take into consideration UK government pension or rental income in working out tax due on other income. This was also the case under the old treaty, but it is now done differently.

Previously the incomes were “exonerated from French tax, but taken into account for the calculation of the taux effectif”. This system allows the tax office to consider total world income – including kinds exonerated from French tax – for purposes of seeing which tax bands your other income should be taxed under, the aim being to avoid you benefitting from tax allowances and lower tax bands both in France and another country.
Income of this kind is declared in section VII of the 2047 foreign income form.

Now they are “taxable income from abroad, giving rise to a tax credit for the French tax”, and are de clared in section VI. The incomes are used as part of the calculation for French tax, but then money is taken off your bill, proportional to the percentage of your total taxable income that these incomes represent.

One difference in practice is that section VI income may be subject to social contributions (for 2012 income, 15.5% for rental income and 7.1% for pension income), whereas section VII income may not.

However, under the treaty the social contributions on these incomes also attract a tax credit, so the bill for these should be zero.

Note that if you are a UK state pensioner with healthcare via an S1 form, you are entitled to exoneration from social contributions on all pension incomes anyway.

This year (2013), bills for income tax and social contributions were combined, so your income tax bill may (legitimately) look larger than usual if you have income that attracts the social contributions.

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