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Income tax deadline: May

The deadline for paper income tax declarations is the end of May.

The deadline for online declarations varies from region to region - you can find the dates at www.impots.gouv.fr The questions and answers on this page come from our 2012 income tax guide helpguide.

Capital gains

WE are French residents as of 2010. In 1993, as UK residents, we bought a UK holiday home - it was never our principal UK residence. We sold it in January, 2012, making substantial gains. I believe we do not have to pay French capital gains tax or social charges on these gains, as we have owned it for 18 years. Are we correct? Do we have to declare it at all?

YES, you are correct, the new capital gains tax rules in France came into effect on February 1 of this year - so you have just made it in time to keep the old exemption after 15 years.

Property capital gains are declared on form 2048, but as the property sold is exempt, there is no need to declare it. It may, however, be wise to state in section E at the bottom of the form 2042 form that a property was sold in the UK, and that it has not been declared as it was held for 18 years and so is exempt.

I got divorced in 2011 - what do I need to do?

WHAT should I do if I got divorced, unpacsed or separated from a civil partner in 2011?

THERE are special rules relating to declaring income for a year when you got divorced or unpacsed (or a civil partnership came to an end). They should be followed to make sure both partners are taxed correctly. In previous years there was a joint declaration for the period up to the separation and two separate ones for the remaining period. This has changed as of declarations for 2011 income. You now make separate declarations for the whole year in which you separated. You have to include your entitlement of any income that you received jointly as a couple, or if you are unable to prove what share was yours, you should declare one half.

Use a blank form (downloadable from www.impots.gouv.fr) or on the internet; ticking the box marked divorcé ou séparé and marking the date of the separation.

Note that after a separation, if you pay your ex-partner money to support your children (une pension alimentaire) and they do not live with you, you can deduct this from your income. If, however, you receive such money, then you should declare this as income (and you will continue to benefit from a supplement to your “family quotient parts” due to having a dependent).

Under certain circumstances other kinds of payments you are required to make to an exspouse may also be deductible.

How is UK rental income taxed?

I LIVE in France but have property in the UK that I rent out. I understand UK rental income is no longer exempted following the double taxation treaty ratification - but now attracts a tax credit. How should this be declared and could you explain the notion of tax credit in France?

THIS income was formerly assessed under a system called the taux effectif, whereby your worldwide income was split between what income France could legitimately assess and income that it could not, such as UK rental income.

While the amount of your UK rental income was included in the tax assessment by the French, this was only in order to effectively push up the tax rate applicable on income that they could assess.

The reason was that you would have been obtaining personal allowances in both the UK and France, and had income that was being taxed from the lower tax bands upwards in both the UK and France. Therefore, compared to the average taxpayer who could only benefit from one set of personal allowances, and only one set of tax bands, you had an advantage that had to be removed in order to put you in the same tax situation as the average taxpayer.

This system is now abolished and, instead, the tax authorities will give a tax credit according to how French tax is calculated.

So, yes, the tax authorities will still assess your worldwide income as they did previously, only this time they will ascertain your overall average tax rate - that is your overall tax liability divided by your world income - expressed as a percentage.

They will then apply this percentage to your UK rental income in order to ascertain the proportion of the total tax that is attributable to your rental income - effectively, therefore, the tax credit - and then deduct this tax credit from the total tax liability.

Most people should benefit as a result of the new system, but some may suffer a little.

Social charges on pensions

YOU have stated that pensioners who have joined the French healthcare system using the UK E121 certificate will not be subject to French social charges on pensions, which is not my experience. Please can you clarify this point?

THE three social charges CRDS, PS and CSG are as a general rule chargeable on all income that is liable to be assessed and taxed in France. However, the state old age pension is paid in consequence of you having paid National Insurance contributions in the UK and, in the UK, once you reach retirement age and draw this pension, you are no longer liable to National Insurance.

The European Court found that France's social charges were an equivalent to National Insurance and that it was incorrect to levy social charges on income which was being paid to a taxpayer due to social charges having been paid by them during their working life. The French have accepted this except in respect of liability to the CRDS, as they say liability to this still applies if the taxpayer is a financial liability to the French social security system.

Fortunately, once someone is entitled to the UK state pension, they also benefit from free healthcare funded by the UK via the S1(E121) form. So, if you have the state pension and the S1(E121)(or your spouse or civil partner has one) and you are not a liability in any other way to French social security, you are not liable to the CRDS. Assuming you have an S1(E121) and no other French social security benefits, you should write to the tax office sending a copy of the S1(E121) (or ask them to check the fact you have one with the health authority, and give them the number on your carte vitale), and direct them to note 17 in the Notice (accompanying notes) for the foreign income form 2047. This should ensure that things are corrected for you. Otherwise, you should contact a professional to sort the matter out.

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