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Tax returns are such fun… they deserve a (third) party

Now is a good time to think about what is coming in May... that being tax declaration time.

I once met a lovely couple, in their home, for a chat and cup of tea. They did their own declarations, and had been doing so for 23 years – and the forms were “always accepted without a hitch”. 

They brought up the subject of their rental income, as they showed me their rental properties (all part of their property). I calculated they were overpaying €3,000 per year.

I helped them claim back the last three years, which was the best that could be done. They said it was the best-value cup of tea ever offered! It is good that they focused positively on the gained €9,000 and not the lost €60,000.

Every year, we also find ourselves dealing with badly, so-called “professionally”, completed declarations, leaving clients to fight the good fight with the tax office. Last week, I saw a declaration from a “help” company, where they had many things to declare and had managed not to get a single one right, leaving the clients with a bill 1,200% more than it should have been.

I often hear that “French accountants charge too much”, when the fact is that they are probably, in the main, charging enough to do the job properly.

I do understand: if your total tax is around €500 and you pay an accountant €500 to do the declaration, you are just doubling your tax bill.

This is when people resort to:

  • The neighbour or friend, who will do it for free;
  • “Help” companies, who will do it for an inflated price, but will speak to you in English;
  • The nice lady in the village who helps everyone, who will do it for €100.

The issue is, who is responsible when things go wrong? The answer is, unless you have engaged an appropriately qualified professional, you are.

How do I know I have found a proper accountant?

Your Petit Robert may tell you that accountant translates to expert comptable, but do not be amazed if you call one and they have no interest in helping you. Accountants in France are generally book-keepers and business administrators, so often do not deal with private individuals.

Commonly, this is dealt with by an avocat fiscal or fiscal lawyer. You can also, legally, ask a notaire, but I advise against this since, in general, notaires have little financial training and, in my experience, prefer to keep away from tax declarations.

Before engaging an accountant/fiscal lawyer, it is a good idea to ask them a couple of questions:

Do you have experience with tax treaties and declaring foreign income?

Do you have the capacity to act as tiers de confiance (they can act as third party, so accept the blame if they mess it up)?

To act as third party, the professional must be an accountant, lawyer or notaire. There are no other professions who may hold the status.

I, for example, am a conseil en gestion de patrimoine, which is all of the above and none of them. I am trained and qualified in tax legislation to accountant standard and fiscal law to notaire standard. But I cannot act as third party (so do not ask me to do your tax declaration).

The legislation says third-party professionals must have justifying evidence/paperwork for all income declared and for all deductions, plus a list of all that paperwork, and have them ready to transmit to the authorities on request.

One common mistake is assurance vie income declared as the amount withdrawn, rather than the taxable income, which is minimal, given that most of any withdrawal is deemed as return of capital.

This can be easily avoided by the professional asking to see the imprimé fiscal unique (tax disclosures) for the assurance vie in question, so this is a lazy mistake to make.

We also see pension income misdeclared and social charges applied to UK rental income.

“Supplying all that paperwork sounds like too much work, I’ll stick with my nice lady!”

If your nice lady, or “help” company, is deemed in any way to be acting as third party, they face being penalised under basic fraud legislation.

The nice lady had better do at least 3,500 declarations to cover her costs and make sure her clients are all friends. Fraud legislation details a minimum of a €350,000 fine and five years’ jail. 

If you are the nice lady in the village and are reading this, then you might want to rethink. If you are one of the “help” companies taking people’s money and messing up their declarations, refusing to correct your mistakes, I look forward to the law catching up with you.

This column was written by Robert Kent of Kentingtons financial advisers. See www.kentingtons.com

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