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Tax change for Brits in France

Expats' UK properties may soon be subject to Capital Gains Tax

BRITONS living in France but owning property in the UK are subject to an important change in the new double tax treaty between the UK and France which comes into full force in April.

Previously if an expat sold a UK property the UK had the right to assess it for Capital Gains Tax (CGT) which is currently a standard rate of 18%.

However, under UK law the UK can only apply CGT to people who are considered ordinarily resident.

Therefore under the previous treaty expats were not liable to pay CGT either in France nor the UK.

No UK tax was payable because the seller was not UK resident and no French tax was payable because the gains were taxable where the home was situated, so in the UK.

The new treaty allows France to levy CGT on residents selling UK-based property.

Should the UK change its laws and begin applying CGT to non resident owners it will take priority and tax paid will be deductible from any subsequent French liability.

The new treaty means that UK property sales will be assessable and possibly taxable in France.

This is not necessarily bad news for most of the Britons in France who either kept their former home when moving or own a property in the UK as under French legislation if you have owned the property for over five years there is a 10% tax reduction for each year thereafter.

This means there is no French CGT to pay if the property has been owned for more than 15 years.

Robert Kent from tax and investment consultancy firm, Kentingtons said: "Although the change closes a highly lucrative loophole for property developers who could buy and sell UK property with no CGT, those with UK property held long term may still sell at a significant profit and pay nothing under French tax rules."

In addition Michael Annett of advisors Pelican Consulting believes that many Britons receiving rental income from properties in the UK can save hundreds of euros a year in French social charges simply by correctly completing their French tax return.

Income from letting UK property is assessable for tax in the UK but not France.

It does count in France as part of people’s worldwide income - the overall figure used to calculate an individual’s tax rate - however some French departments have been levying social charges of 12.1% on this income instead of just using it to calculate the tax rate.

Mr Annett said: "If people are paying social charges on rental income which has already been taxed in the UK, it must be because they are putting it in the wrong box on their tax form. People should take professional advice if they are uncertain as to how this should be treated on the form."

Richard Hatt from Siddalls agrees. "French social charges were not payable on rental income from the UK under the previous treaty and are still not payable under the new one."

He added that under certain circumstances the French tax authorities will also allow a CGT exemption on the sale of a former main residence in the UK for up to two years for sales completed in 2009 and 2010, irrespective of whether the property has been owned for more than 15 years.

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Income Tax in France 2023 (for 2022 income)*
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- Primarily aimed at Britons, covers pensions, rent, ISAs, shares, savings and interest - but also contains significant general information pertinent to readers of other nationalities - Overview of online declarations + step-by-step guide to the French printed forms - Includes updates given automatically after this year's site opened
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