Is it best to sell usufruit property in France before returning to the UK?
You need to agree to sell the property with the person or people who own the residual legal rights
We look at France’s property news for this month
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Reader Question: As a widow, who lives in my home as an usufruitier, I am resident in France, but am returning to live in the UK and am worried about tax. Should I wait until the house is sold before changing residency? As a usufruitier, am I even an owner?
As an usufruitier, you own a lifetime right to live in the property or to rent it out and benefit from the proceeds. To sell up, unless just selling the usufruit right, which is unusual, you need to agree on this with the person or people who own the residual legal rights (nue-propriété).
If the house was seen as a second home, and you have had your usufruit for less than 30 years, any capital gain that has accrued between the date you acquired the rights and the date of sale could be subject to French capital gains tax and/or social charges.
This would be worked out on the value of the usufruit at the date when you acquired it compared to on the date of sale. The value of an usufruit right decreases with age (it is for example 30% of the property’s market value at age 71 to 80, and 20% at age 81 to 90). You would also benefit from reductions of any capital gain linked to how long you have owned the usufruit (on a rising scale after five years’ ownership).
So, unless there have been high property market rises in the area, there may be little or no tax to pay on sale of your usufruit. If there is tax to pay and you have in the meantime become a UK resident, depending on the sale price, you may need to engage a fiscal representative to deal with the tax.
It is, however, possible for someone moving from France to the UK or another country which has signed an agreement with France on tax evasion (tinyurl.com/tax-evas) to maintain a ‘main home’ capital gains tax exemption until the end of the year after the one you move to the new country. This is on condition that you keep the home for your use and do not rent it out or give it to someone else to use free of charge.
So, doing this may be the simplest option.
