We can provide advice, assistance and useful contacts to make your move to France easier.
If you are making the decision to leave the UK and move to France there are a number of areas you will need to consider, this may not be a complete list but some of the areas you need to consider are:
The timing of your move. The UK tax year runs to 5 April and the French system runs to 31 December. Depending on the timing of your permanent departure from the UK, it is likely that you will have to deal with a split year for tax purposes and will need to complete both UK and French tax returns.
Notify HMRC of your departure by completing form P85. This should trigger adjustments to your tax codes etc so that you no longer have to pay UK tax on certain sources of income.
NI contributions/pension rights. When you relocate to France you will need to consider your National Insurance status. If you are earning in France then you will probably be expected to contribute to the French Social Security system. There are some temporary employment arrangements where you do not anticipate being in another EU country for more than 2 years, where you can continue to contribute the UK NI system.
Exchange differences (UK income vs French expenditure). If the majority of your income is to be received in GBP but your expenses are in Euros, you will need to be prepared to deal with the effect of exchange rate fluctuations. If Sterling decreases in value compared to the Euro, you could find that your income is no longer sufficient to cover your Euro living expenses. We have links with exchange brokers who generally give better rates of exchange than high-street banks.
UK property rental. If you decide to keep your UK property in case you decide to come back to the UK, any rental income from the property will need to be declared on both UK and French returns. Under the UK/France double tax convention, as the property is in the UK, you will pay tax on the rental in the UK. It will still need to be shown on your French tax return and the UK tax paid will count as a credit towards your French bill. If UK taxes are higher you won’t get a refund and if the French bill is higher you will have to make a further payment in France.
UK Capital Gains. If you decide that after a few years you want to sell your UK property, it is likely that for UK tax purposes any capital gain on the property will be covered by either Private Residence Relief or Letting Relief. This may not be the case for French taxes. French reliefs tend to focus on whether a property is your main home when you sell it, rather than looking at the history of ownership, so you may find a sale at a later date would give a large, French capital gain. The timing of your departure from the UK and sale of the assets needs careful planning.
French Property and inheritance issues. Under the French system your UK will and desires may not be recognised in France. You need to consider making a French will also. This may also have an impact on the ownership structure in place when you first buy your property. The rules are changing in this area so you need to make sure you have discussed this with an English speaking notary.
Wealth tax. This tax is unlike any UK taxes and is an annual charge based the value of your assets including your property. The starting point for this tax is over €1.3m so does not affect the majority of tax payers. For non-residents, only French property assets are taken into this calculation but for residents, all French assets are considered and this is extended to worldwide assets after 5 years of residency.
Healthcare systems. There is no NHS in France and you cannot rely on your EHIC holiday card to provide you with healthcare.. There are some reciprocal arrangements for those in receipt of a state pension (and special rules for their spouses). If you are not contributing the French healthcare system you will need to take out private health insurance.
Visits back to the UK. HMRC have recently updated the rules relating to residency for tax purposes and a number of factors are now taken into account to determine whether you will be resident for UK purposes. These include:
Number of days spent in the UK in any tax year;
Whether you have established residence elsewhere;
Whether you have a UK home;
Where your family live (partner and young children);
Whether you have taken steps to become part of the local community etc.
Maintaining your UK business. If you are a shareholder/director of a UK company you need to consider the impact of moving abroad on your company’s tax status. If you are a reasonably sized business with employees and a fixed UK business premises, then you should not have any issue for the company. If however you operate a home-based business, your relocation of the main office to your home in France could trigger a French tax obligation. In particular you will need to look at whether the company pays you a salary for services performed in France, or whether your remote activities constitute a French branch of your UK business.
If you are going to make the move to France you need to make sure that you thoroughly investigate these and other aspects that will affect you before you decide to make the move.
If you have bought a second home and only plan to spend short periods of time, occasionally in France, then it is likely that you will remain UK resident for tax purposes.
If you plan multiple or long term visits to France see Emigration.
Some of the factors that you need to consider as a foreign investor are:
Capital Gains Tax. When you come to sell your second home in France, any increase in value is likely to give rise to a UK capital gains tax liability. This calculation will be based on the Sterling values at the time of purchase and sale. It is not uncommon to have a gain in one currency but loss in the other. As the property is based in France the gain/loss needs to be reported on a French return. Make sure that you keep all of your receipts for improvements made over the period of ownership. Not only are taxes due on the capital gain (19%), but also social charges (15.5%) and the social charges can’t be offset against UK liabilities' Inheritance tax (see Emmigration above).
Wealth tax. (see Emmigration above).
Alternative structures to buy the property. The inheritance rules in France mean that there are quite punitive inheritance tax rates applicable to passing the asset onto your beneficiaries, unless they are direct family members. Step-children in particular can cause complications. Rather than buy the property in your own name, it might be that you want to buy it through a corporate structure Société Civile Immobilière (SCI) enabling you to leave the shares in the company rather than the property to the next generation.
Rental income from your French Property. If you are generating rental income on your property, then this is an additional income source that needs to be reported on your UK tax return. You can deduct some expenditure from your income but remember to disallow expenses relating to any private use of the property. Even if all of your tenants are UK-based, you will also have to declare the income relating to the French property on a French return and pay these taxes in France. The double tax Treaty between the UK and France means that in reality you will pay tax once but the income will be declared on both returns.
If you have adopted an alternate business structure such as an SCI, that entity will need to prepare annual accounts and a tax return in its own right. If you provide any additional services, perhaps cleaning or cooking, (for example at a ski resort), then you need to be aware whether these extra services turn your investment business into a trade. There may be some advantages to having an overseas trade (UK loss relief in particular) but there would almost certainly be additional reporting requirements, particularly if you pay locals to perform any of these services.
Before you make the leap to buy your second home in France, do research this area further and take advice.
EXPORTING TO FRANCE
Whether you provide goods or services, for many parts of Southern England, France is a physically closer market than many parts of the UK. There may be language and cultural barriers to begin to do business with France, but once these have been negotiated the French market could be lucrative.
Exporting goods. Where goods are physically transported from the UK to France, your main business activities remain in the UK so there shouldn’t normally be any reason to register your business in France.
VAT. If you are VAT registered then the EU acquisition rules apply. Where your customer is VAT registered you need to request their number and you are able to make the sale without charging VAT on the sale. Each quarter however you will need to complete an Intrastat form which shows sales to other EU VAT registered businesses.
If the end customer is not VAT registered then you need to charge VAT in the normal way.
If you use an intermediary or branch structure or have an overseas representative, you need to take further advice.
Exporting services. If you provide a service to French customers, the rules can get more complicated.
As a UK business providing infrequent services to French businesses, it is unlikely that you would be required to register your business in France.
If, however, you carry out a high proportion of your services in France, to French customers, you need to consider whether you are in fact carrying on a French trade.
The rules for VAT are also more complicated with services. Generally it is now accepted that the place of supply for VAT purposes is where the customer is located. Some notable exceptions are where the services relate to a property. The place of supply will then be the country where the property is located. Detailed advice relating to your circumstances should be sought.
A new scheme is in place for highly automated supplies of electronic services which covers items such as downloads of music, books, software etc. From 1 January 2015 the place of supply for VAT purposes will be deemed to be the location of the client. If a business does not have a permanent establishment in that country, there are no VAT thresholds, and just one sale to a customer in another EU country triggers a VAT reporting obligation. The EU governments have worked together to try to simplify this for tax payers. The Mini One Stop Shop (MOSS) system allows a UK business to register in the UK and prepare a single return to cover all EU countries where sales are made. This means that websites and internal systems have to be able to deal with identifying where a client is located in order to determine what rate of VAT to charge to that customer and what the VAT reporting obligations are in that country to be able to prepare compliant invoices etc.
Use of overseas websites. If you use a website overseas to sell your goods (eg Amazon.fr), you need to consider whether this constitutes a French business. Factors to take into account are where the goods are physically distributed from.
VAT registration rules for a UK company making sales in France are different from those for a company only registered in France and therefore exemption thresholds in particular may not apply to your UK business. You should also be cautious where non-UK customers are buying via your UK website.
Remember, as soon as you have any sort of fixed establishment in France, you will have to register for French taxes. This may include the home of an employee who now lives in France and is carrying out duties there. This may be in the form of a branch or a separate business.
SETTING UP AN OVERSEAS BUSINESS
France has a reputation for being bureaucratic and there is a complex system of tax and social charges, so you need to make sure you fully understand the rules before you launch your business in France.
The main structures available to you are:
Entreprise Individuelle (EI);
Entreprise Individuelle à responsabilité limitée (EIRL);
Entreprise Unipersonelle à Responsibilitȁ Limitée (EURL);
Société à Responsibilité Limitée (SARL);
Société par actions simplifiée (SAS); and
As a sole trader (EI) you may be able to adopt a simplified accounting through the micro tax regime.
The form your business needs to take will be linked with your specific circumstances and detailed advice should be sought.
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