French Capital Gains Tax Reform from February 2012

From the 1st February 2012, current French Capital Gains Tax laws will undergo changes which will affect second home owners in France. The reforms to French Capital Gains Tax (CGT) will apply to both French residents and non French residents selling second homes and other non-business property,

Full exemption via the progressive rate of taper relief will now be achieved after 30 years rather than 15 years under the previous laws.
For French residents there has also been an increase in Contributions Sociales, which apply to taxable gains, rising from 12.3% to 13.5%. As a result the total tax rate applicable on gains in their case will rise from 31.3% to 32.5%

Click here for a break down of the technical notes

So how will this impact your sale?

Summary of French CGT changes

UK Residents

UK-residents are liable to CGT in the UK as well as France in the vast majority of cases. However any French tax paid is fully credited against the UK CGT due on the same sale. Thus, when the UK CGT payable exceeds the French tax, the impact of the French tax change will be neutral.

On the other hand more owners will face increased sales transactions costs: If the value of your French property exceeds €150,000, a fiscal representative must be appointed. Their role is to take initial responsibility for calculation and payment of French CGT and cover additional liabilities arising from any subsequent Tax Office re-assessment.

Charles Hamer’s role in Reducing Your Costs and Taxes

Charles Hamer will obtain a 25% reduction in the Fiscal Representative’s standard charge. By working with them to ensure they make full use of the available allowances, exemptions and expenses permissible under French legislation, Charles Hamer will help you to keep your French and UK CGT liability to a minimum. The discount in fiscal rep. fees will often more than cover own charges.

OUR SERVICES TO UK RESIDENTS

Whilst the notaire may be responsible for submitting the tax return (“2048-Imm”) and the fiscal representative (when relevant) responsible for the payment of the tax, neither has any responsibility to ensure such tax is kept to a minimum.

When selling your French property, it is therefore your responsibility to ensure you pay the minimum amount of French Capital Gains tax (Plus-Values).

We are here to help you achieve this aim.

On your behalf we will:

Advise on how you can structure the sale price in the compromis de vente in a manner which reduces CGT payable (If instructed early enough).
Appoint the Fiscal Representative and obtain a 25% discount on the Fiscal Representative charges as otherwise levied if appointed by the notaire.

Our services go as far as you want them to. When obtaining all necessary information and documentation from the notaire and yourselves necessary to minimise the CGT payable, we are then able to:

Prepare the French CGT account.
Liaise with the Fiscal Representative and the notaire for agreement of the final account and payment of tax and sales proceeds.
Prepare the UK CGT account.
Complete UK supplementary self assessment forms disclosing the net tax payable in the UK, (or establishing the loss if relevant).
Claim the tax credit for any tax payable in France for offset against any corresponding UK CGT.

LOSSES

It may be clear that a taxable gain will not arise in France or the UK. Any losses arising for UK tax purposes, may be used indefinitely to offset UK Capital gains tax due on any other investments - shares, unit trusts, other investment property, gifts, and during Inheritance tax planning.

Charles Hamer are available to draft a capital loss assessment to submit and be approved by the UK tax office, for such use.

FRENCH TAX APPEALS

You may have already sold the French property and paid the tax due, as assessed by the fiscal representative or the notaire, but are concerned that you have overpaid.

Not to worry, if the sale took place less than 3 years ago* , we can:

Check the paperwork to ensure you have paid the correct amount of tax and
If you have overpaid French tax, draw up and pursue an appeal on your behalf, should the amount recoverable be worthwhile.

*An appeal may be made at any time up to the 31st December 2 years following the year of the sale

OUR FEES

These are fixed as follows, depending on whether or not the property has undergone improvement works which you wish to claim as a valid deduction against the gain.

Each structure then has 3 options, allowing you to decide whether you want our involvement just for the French tax declarations, the UK only, or both:

Fee Structure A: (No improvement works or cost of improvement works are less than 15% of the original purchase price)

For overseeing the French CGT account and declaration only £425
For preparation and completion of the UK declaration only £425
To establish declarations both in France and the UK £760

Fee Structure B: (When there are improvement works which exceed 15% of the original purchase price.)

This can involve substantial extra hours in validating the cost of improvements sufficient to satisfy the scrutiny of the Fiscal representative and the tax office. Accordingly, to provide for this extra work we levy an additional hourly charge to the above fixed fee, at a rate of £108 / hr, subject to a maximum accounting charge of £640, (6 hours). This can include:

Establish declarations both in France and the UK £1,400 (max)
Establish declarations in just France £1,065 (max)
Establish declarations in just the UK £1,065 (max)

WHY USE CHARLES HAMER’S SERVICES?

Not only do our discounted fees mean savings from your fiscal rep. fees, but your trust invested in us could save you £1000’s in CGT payments and put you at ease when selling your French property.

Illustrative Example: Click here to see an illustrative table of the savings available.

How to Proceed

Having reviewed the services that are available the next stage of the process requires more information from you to allow us to make an accurate assessment of any liability due in France and the UK.

To continue forwards, please fill out our please fill out our questionnaire, attach the documents described (as well as our instruction letter) and return them to alex@charleshamer.co.uk

or by post to:

Mark Gould
Charles Hamer Financial Services
87 Park Street
Thame
Oxon
OX9 3HX

If you have any further questions regarding our services or how to proceed please don’t hesitate to send an e-mail to Mark@charleshamer.co.uk or contact us directly on 01844-218956