Buying French house share and CGT
We are both divorced and not remarried and live and pay tax in the UK. We bought a second home in France in 1997, ‘en indivision’. I have two children and my partner a son from the previous marriages. She wants to help her son buy UK property so I plan to buy her half share of the French house. Should I do this after 2019 to avoid CGT and the 22-year rule? As outright owner, should I add a codicil to my UK will to ensure only my children inherit? What French or UK taxes do I face and are there other drawbacks? J.G.
Firstly, (and generally) if you are divorced, and not remarried, your new partner has no automatic inheritance right if not left an interest in a will. Interestingly, too, a UK divorce automatically revokes a gift to an ex-spouse in an old will, but not in France.
Buying out your partner is sensible. Your children inherit directly from you, maximising French inheritance tax allowances of €100,000 per child from a parent. Inheriting from a step parent, would mean 60% tax after a €1,594 allowance.
On the timing, CGT here is in two parts: tax of 19%, exempt after 22 years of ownership, and social charges of 17.2%, exempt after 30 years.
The European Court said social charges do not apply to non-French residents, but they are applied anyway and although individuals can go to court to try to recover them, this is costly and uncertain, takes time and even if successful, you may not recover your full legal fees.
Receipted renovations by French-registered trades can reduce the gain and a default 15% is taken off after five years for general upgrades. Original notaire fees and buying costs are also deducted, or a default 7.5%.
The notaires.fr online CGT calculator (simulateur) has costs for varied sale dates.
If you do buy, there will be new notaire fees of 7-8%.
Your will may need specialist advice. If you are unmarried, intestacy laws leave the estate to your children, which may be easier than an English will’s practical and tax hurdles. You may be better without a will, unless it is carefully drafted.
Question answered by Barbara Heslop of Heslop & Platt
Tel: +44 (0)113 393 1930 -www.heslop-platt.co.ukcontact@heslop-platt.co.uk
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