French Capital Gains Tax Post Brexit

CHARLES HAMER'S 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.

Pre Brexit, it was often the case that the French tax payable fell below the corresponding UK tax due and, with the French CGT paid being 100% 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 often wasn’t so much of a concern. The main issues arose when improvement works took place, when such works needed to be audited according to strict rules, which is when our input and expertise came in handy.

Post Brexit, for UK residents, the position is significantly different in two principal ways, the upshot of which is that now, unless the sale is at a loss or is exempt, there is always a material incentive to work at minimising the French tax as much as the rules allow.

1). The Reintroduction of French Social Charges.

Prior to Brexit, albeit after much protracted battling, the French administration admitted that the 9.7% social charge component of the French levy on gains – CSG and CRDS – was not chargeable when the taxpayer was subject to the national insurance legislation of another EU or EEA member state. Consequently the Prélèvement Sociux component of French CGT was only 7.5%

Post Brexit, although there are exceptions, initially this was no longer the case for UK residents or UK nationals resident in France and the charge was increased to the standard 17.2%. From the beginning of March, however, the French tax office has reverted to the pre-Brexit position and in most cases we can agree with the fiscal rep or notaire that the lower 7.5% charge can be maintained. For those who have nonetheless suffered the higher levy, whether due to having sold in the course of 2021 or because the notaire or fiscal rep is not aware of the new official arrangements we can prepare and submit a claim for recovery on your behalf.

2). The reintroduction of the Requirement to Appoint a Fiscal Representative

Prior to Brexit, for the most part, there wasn’t any requirement to appoint a fiscal representative. Instead, the notaire was responsible for signing off the French CGT declaration and in practice their interpretation of the legislation tended to be lenient, especially when assessing the validity of enhancement works as a qualifying deduction and the documentation required to justify their value.

Post Brexit, for UK residents, it is usually compulsory to appoint and pay for a fiscal representative, normally whenever the sale price exceeds 150.000€. The role of a representative is not to act in your best interests. Rather, it is to stand liable on behalf of the non-resident taxpayer for any tax liabilities owed by them to the tax authorities. Consequently, they have an incentive to minimise that risk to themselves. As a result, they take the harshest interpretation of the French legislation and tax office practice when arriving at the taxable gain, often ignoring established statements of what is allowable in order to reduce potential exposure. The regular outcome is a tax liability that is higher than would have otherwise been the case had it been directly assessed by the tax office itself.

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 this.

Our role is to act on your behalf with a view to arriving at a French tax assessment that fairly and accurately reflects the circumstances of the sale and the history of the allowable expenditure incurred on the property during its ownership.

Our service will include consideration whether you qualify for exemptions as well as working with you – liaising, when relevant, with past contractors or professionals in order to obtain the documentation needed - to meet the standards of proof required to allow the cost incurred to be included in the computations.

Click here for a break down of the technical notes

HOW WE ACHIEVE A FAIR & ACCURATE FRENCH TAX ASSESSMENT

We do this on your behalf by:

Considering the relevance of any available financial planning options prior to the sale which have the net result of reducing the overall CGT liability, (if we are instructed early enough and prior to the property being marketed for sale).
Advising on how you may be able to structure the sale price in a manner which reduces the CGT payable (again if instructed early enough prior to a buyer being found).
Assessing your situation to determine whether one or more French CGT exemptions may apply to you.
Addressing the question as to whether any works you carried out on the property are of a nature which warrants a deduction.
Helping you to package the documentation required to meet the legislative requirements so that the cost of such works is sufficiently justified and thus deductible from the gain
Ensuring that appropriate default revaluations to acquisition costs are applied
Ensuring that the fiscal rep does not ignore costs which are allowed by French law. We make use of favourable case history, tax office statements of practice, in addition to the tax code, in order to make your case.
Recommending a correspondent Fiscal Representatives who is willing to accommodate our analysis and 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.

We liaise to obtain all necessary information and documentation from the Notaire, yourselves and any third parties (such as building contractors, architects, valuers) necessary to minimise the CGT payable. We are then able to :

Prepare the draft French CGT account.
Liaise with the fiscal representative in order to reach agreement on the final account, the payment of tax and receipt of the sale proceeds.

click here for: Examples of previous French Capital Gains Tax savings

PREPARING THE UK SELF ASSESSMENT CAPITAL GAINS TAX SUPPLEMENTARY RETURNS.

You decide on the extent of our service. We can limit our involvement to dealing with the French tax declaration or you can ask us to include our preparation of the UK computations and completion of the relevant UK self-assessment forms as well.

Our role for the UK assessment is to:

Prepare the UK CGT account according to the UK tax calculation rules, including any scope for exemptions and/or reliefs.
Complete UK supplementary self-assessment forms disclosing the net taxable gain in the UK, (or establishing a loss if relevant).
Claim the tax credit for any tax payable in France to offset against any corresponding UK CGT.

LOSSES

It may be clear that a taxable gain will not arise in France or the UK. In such cases, although there is nothing to advantage in France, the opportunity exists to register the sale as a loss in the UK. This loss may then be used to avoid or offset UK Capital Gains Tax due on any other investments such as shares, unit trusts, other investment property or gifts, whether I the same or future tax years.

We at Charles Hamer are available to compute the capital loss for submission, as required for it to then be taken into account, either against gains made in the same year or to be carried forward.

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 have concerns that you may have overpaid.

If the sale took place less than 3 years ago* , we are able to:

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, in the event that the amount recoverable is worthwhile.

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

WHY USE CHARLES HAMER'S SERVICES ?

The purpose of our service is to provide both value for money and peace of mind.

Not only is there the potential for a discount on your fiscal rep. fees, but the trust invested in us could save you £1000's in CGT payments and put you at ease when selling your French property.

click here for:Examples of previous French capital gains tax savings

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.

In order to do this, please complete our questionnaire and return it via email to Emilie Mengin ( info@charleshamer.co.uk )

If you have any further questions regarding our services or how to proceed, please don't hesitate to send an e-mail to jon@charleshamer.co.uk or info@charleshamer.co.uk or call us directly on +44) 01844 218957