Banking post-Brexit in France: time to ‘think local’
In this month's money column, Bill Blevins covers what to expect regarding UK-based financial services for Britons in France after 31 December
This column is by Bill Blevins of Blevins Franks financial advice group (blevinsfranks.com). He has decades of experience advising expatriates in France and co-authored the Blevins Franks Guide to Living in France.
This unpredictable year has prompted many of us to rethink our priorities and re-evaluate the way we live.
During lockdown, our worlds became a lot smaller and our needs simpler. Whether this has had a permanent effect on your outlook as restrictions have lifted will be a personal issue. But now, with full Brexit just weeks away, there are other pressing reasons for UK nationals in France to “think more local”.
If you have a relationship with a UK-based financial adviser, bank or other institution, you may find they can no longer support you from January 1.
This is because many UK financial businesses are set to lose the right to provide cross-border banking and investment services within the EU and European Economic Area (EEA) once the transition period ends.
We have already seen that some major UK banks have sent letters to EU-based clients to advise they will be withdrawing their services.
What to expect in the new year
Although we still face unknowns about the form Brexit will take, one thing we know for certain is that the transition period will end at midnight (CET) on December 31, 2020.
As the new year begins, France will remain an EU member state, while the UK will officially become a “third country” no longer subject to EU rules, regulations and protections.
Thanks to the UK-EU Withdrawal Agreement, UK nationals lawfully settled in France before 2021 will lock in the right to enjoy uninterrupted citizens’ rights, even if there is a no-deal Brexit.
However, at the time of writing, there is no mutual agreement on financial services, leaving many UK financial businesses without a licence to operate in France from January 1, 2021.
How UK financial services are affected
Today, UK firms providing financial services to Britons living in France are legally able to do so under the EU’s “passporting” arrangements.
Cross-border transactions are permitted because all EU member states have to abide by the same financial regulation rules within the single market. So currently, the UK’s Financial Conduct Authority (FCA) has to meet the same standards as the Autorité de Contrôle Prudentiel et de Résolution (ACPR) in France.
Once the UK – and the FCA – can make their own rules, the regulation of financial activity and consumer protections may not continue to line up on both sides.
Without the assurance that its own standards are in place to protect EU residents/businesses, the EU will not permit passporting for UK financial firms from January 1, 2021.
It is possible the UK and EU may still reach an arrangement in this area during negotiations, but as things stand, to continue supporting EU-resident clients, a UK business must either relocate to the bloc or restructure and form specific agreements with financial regulators for each EU/EEA country they operate in – a complex, time-consuming and expensive process. While some UK financial firms have put arrangements in place to come under the authority of the French regulator and continue working in France, others have not.
We know of at least two major UK banks that have advised France-based clients that they cannot provide services post-Brexit in the absence of a UK/EU financial services agreement, recommending that they make arrangements with an alternative provider.
How this might affect you
If you still hold a British bank account or investment product and your provider has not contacted you about limited services in the future, ask what arrangements are in place for next year.
While you should be able to retain existing accounts/policies and make withdrawals as an EU resident, you may be restricted from adding or moving funds and applying for new services, such as term deposits, bonds, foreign currency management, loans, credit cards and mortgages.
If you have a longstanding relationship with a UK-based financial adviser and wish to continue using them while living in France, check they can support you post-Brexit.
The financial regulator in France has already confirmed it will be illegal for French banks and insurance firms to do business with a provider not authorised in France.
This means they will not accept instructions, such as top-ups, from UK-based advisers. Other EU countries may follow suit, so this could severely limit your planning opportunities in future.
You should consider whether an adviser based in a different country is best placed to help you take advantage of opportunities available here.
Do they have in-depth knowledge of the French tax regime and how it interacts with UK taxation, as well as the local residence, domicile, succession law and reporting rules? Will you be left to face the consequences if they get things wrong?
Financial planning for France
Even if this issue does not affect you, now is a good time to review how you hold your savings and investments, pensions and other assets.
The key reasons for this are three-fold in the face of Brexit.
First, you need to make sure your financial planning is tailored for your particular situation, including your income requirements, goals and appetite for risk. A strategy designed for a UK resident, for example, is unlikely to remain suitable once you become resident here.
Explore opportunities for French residents that can offer tax-efficiency as well as advantages such as multi-currency options and estate planning flexibility.
Second, your wealth and assets should be held as tax-efficiently as possible for your life in France. Beware that if you are holding on to UK savings and investments, they could potentially attract a higher tax bill from 2021 once they cease to be EU/EEA assets.
Third, make sure you take advantage of suitable opportunities while you can, as it is likely that some rules may change after Brexit, especially around taxation of UK pensions.
With limited time before Brexit changes the landscape, it has never been more important to ensure your financial arrangements are compliant and suitable for your life in France.
Now is the time to talk to an experienced, locally- based adviser to secure financial peace of mind for you and your family in 2021 and beyond.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.