French Capital Gains Tax Reform:

CHARLES HAMER'S FINANCIAL SERVICES ROLE IN THE SALES PROCESS

If you are lucky enough, the sale of your French property will result in you realising a gain on your investment. The downside to this is that the gain will normally be assessable to tax in France and again in the UK if you are UK resident.

Until recently, it was often the case that the French tax payable fell below the corresponding UK tax due and, being available as a credit to offset against UK capital Gains Tax (CGT), in the wider scheme of things the amount of French tax actually paid wasn’t so much of a concern.

With the hike in the French tax rate from 19% to 34.5% which took place in August 2012 and the reduced taper relief effective from February 2012, this is no longer the case. More often than not, French CGT will now far exceed the UK tax counterpart.

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 of them have any incentive to ensure such tax is at a minimum, despite the latter charging you!

Click here for a break down of the technical notes

Indeed, since the fiscal representative takes on the responsibility for any further tax arising from any tax office re-assessment of any French CGT declaration submitted following the sale, they have an incentive to do the opposite.

In our experience, typically, the fiscal representative will not:

Consider whether or not you qualify for one or other of the more obscure French CGT exemptions available.
Liaise with you to help determine whether or not works done to the property are a deductible expense
When such works are potentially allowable, package the documentation needed to ensure that the cost of such works is deductible
Or even ensure that in the case of company ownership, that the correct CGT assessment regime is applied.

Furthermore, when, from the viewpoint of the fiscal representative, there is an element of doubt over the initial CGT calculation or risk of additional tax being charged in the event of verification by the tax office, then they will look to withhold sufficient funds to cover the potential higher liability until such risk passes by. Normally, unless other information comes to light, this withholding period is 4 years beyond the date of sale

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

We are here to help you achieve that by addressing each of the points above – and others – as may be relevant under current French legislation.

OUR SERVICES TO UK RESIDENTS

On your behalf we will:

Consider the relevance of available financial planning options prior to sale which have the net result of reducing the overall CGT liability.
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).
Assess your situation to determine whether one or more French CGT exemptions may apply to you.
Address the question as to whether or not any works you carried out on the property are of a nature which warrants deduction from the gain as an additional acquisition cost.
Help you to package together the documentation required to meet the legislative requirements for the cost of such works to be sufficiently justified and thus deductible from the gain
Ensure that appropriate default revaluations to acquisition costs are applied
Appoint our correspondent Fiscal Representative who will levy a fee which is either at a discount to or, at worst, no higher than that charged by the representative appointed by the Notaire.

Examples of previous French capital gains tax savings

Why do we have a correspondent Fiscal Representative?

Certainly we cannot obtain favours and neither do we receive any remuneration from them!

Rather, our philosophy is based on the old adage of better the devil you know. Our familiarity with their working processes, together with our having reached a consensus as to the interpretation of the legislation, results in us being able to offer procedural solutions to problems which would otherwise have to be addressed from scratch if having to liaise with a less compliant fiscal representative, (of which there are many!).

Similarly, it does away with the need to submit an appeal to the tax office at a later date, (and the extra costs to you in doing so) should we fundamentally believe the fiscal representative is wrong in their calculation of the tax payable.

The extent of our services goes as far as you want them to. We can limit our involvement to the French tax declaration or carry our service through to the UK self assessment return.

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

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 please contact our advising partner Jonathan Pawsey by email(Jon@charleshamer.co.uk), telephone (+44) 01844 218956