Should UK charitable donation be declared in France?
Sophie Hearle of Heslop & Platt answers a reader query on French inheritance tax liability on UK care home trust donation
Reader question: My eldest sister died intestate. There are two beneficiaries: myself and my other sister. The estate, all from bank accounts, will, in the first instance, be paid into my account. My sister lived in a charitable care home. We wish that most of the money should be donated to the care home trust. As a French resident, could I be liable for French inheritance tax on the whole amount? Do I have to make a declaration?
Assuming your deceased sister was domiciled in the UK and held assets only in the UK, it should be possible to draw up a deed of variation, in which you would specify the shares you are each passing to the home, which would be seen as a lifetime gift.
A gift to a qualifying charity is exempt from UK inheritance tax.
If more than 10% of the deceased’s estate passes to charity, the rate at which UK inheritance tax is paid on the remainder of the estate is reduced from 40% to 36%. If your deceased sister held no assets abroad, only UK inheritance tax should apply to her estate.
However, the gift to the charity will be subject to French gift tax rules.
Gifts to qualifying charities are exempt, and this includes ones situated within the EEA (please note: this is unlikely to apply after the Brexit transition period).
You would need to seek agreement from French tax authorities regarding the care home’s charitable status – it must meet certain requirements under French law – and submit a gift tax declaration.
As of next year, a gift of part of your share could be subject to 60% tax.
If you have been a tax resident in France for six out of the 10 years preceding your sister’s death, and your gross inheritance is worth more than €50,000, then you would have to declare your inheritance in France within 12 months of the date of death. You would not, though, have to pay any inheritance tax in France.