Viewing posts from: November 2000

Big brother is watching… or might be

By Katriona Murray-Platon
This article is published on: 2nd April 2021

02.04.21

After the fun and festivities of March (or those that could be had in current circumstances) it’s time to get down to serious tax work in April. The tax forms and dates of submission have not, at the time of writing, been released so that will have to wait until next month’s Ezine but usually the forms are available around the second week of April. If this is your first year of declaring in France you will have to go to the tax office to get the paper forms to complete. After submitting your first paper return you should then be given details to allow you to log on to your online account and do future returns online. The paper returns you will need are usually the 2042, sometimes the 2042 pro if you have professional income, the 2047 for all foreign source income and the 3916 for bank accounts and assurance vies (section 7 of the form).

The 3916 has recently been amended to take into account the new information that needs to be declared. Make sure you tick box 8UU for bank accounts and 8TT on the 2042 form to flag the fact that you have foreign assurance vies.

Under Article 1649 AA of the French Tax Code, those tax payers who have foreign assurance vies must declare the policy number, the amount of the investment, the start date of the policy and the duration of the contract or investment, any top ups or payments or reimbursements of premiums made during the tax year and, if relevant, the amount of any withdrawals or the surrender value,

Article 344 C of the Tax Code has now added new requirements concerning the information for foreign assurance vie policies which are:

The identification of the policy holder: name, forename, address, date and place of birth,
the address of the head offices of the insurance company or similar institution and, if relevant, the subsidiary which grants the cover,
the person covered by the policy, its reference numbers, the nature of the risks covered,
the amount covered by the policy and the duration of this cover,
the dates of any amendments to the contract, total or partial withdrawals, which have taken place during the calendar year.

Our policy providers are aware of this new law and will send out the relevant information for you to add into your tax returns or attach as a document online.

Those who have regular at home services and pay via CESU usually receive a tax credit for these expenses, 60% of which is paid in January. From June 2021 the tax office will be trialling a new system of immediately paying the tax credit for home help for those employers in Paris and the Northern departments who use the CESU system, before progressively rolling out this system across the whole country in 2022.

According to a study from the US bureau of Labor Statistics in 2015 which looked at the number of jobs a person held between the ages of 18 and 50, the average person will have had 12 jobs. This is during a span of 32 years, so therefore the the number is likely to be higher for a person’s entire lifetime. This means that you are likely to have several pensions with several pension providers without knowing the value, investment strategy, performance or fees on these investments.

France has clearly realised this situation as well. Retirement plans for French companies are held by insurance companies, so when you leave the company you may not continue to receive information on what rights you have accrued. Now, thanks to new legislation, insurers must send the information on file to a centralised body. If you are or have been an employee in France you can go to the website info-retraite.fr to be informed of what rights you may have. The new law also requires employers to communicate a statement of the retirement products to those leaving the company. When I left my job in Paris I had a PEE (Plan d’Epargne Entreprise or company savings policy) which I had done nothing with. I was advised that as I was no longer an employee of the company this was just being eaten up by fees. I closed it down and reinvested the money into two assurance vies for my sons which are now growing nicely.

The Spectrum IFA group offer a free review of your pensions. We will help you obtain the relevant information from your pension providers and prepare a free report on your current pension plans and their benefits and whether they can or should be combined into one self investment pension plan or qualified overseas pension scheme. As I often say to clients, I agree with the many eggs in baskets principle but it is better having your baskets on a shelf where you can see them rather than eggs hidden around the farm!

If you have an SCI remember to put the 4th May in your diary (may the fourth be with you!) as this is the deadline for the income tax return for SCI companies that are not subject to corporation tax. This is also the deadline for accountants to file the income statements for those with industrial and commercial businesses (BIC), non commercial businesses (BNC) and agricultural businesses (BA). The deadline is extended to 19th May for online declarations. As yet the other tax filing deadlines are not known.

In the finance law for 2020 (article 154) a new law allowed the tax and customs authorities to use certain data published on the internet (Law no 2019-1479 of 28.12.19). The decree implementing this data mining provision was published in the Official Law Journal on 13 February 2021 (no 2021-148 of 11.02.21). This means that the tax authorities are allowed, experimentally and for only three years, to use information published by tax payers on social media (Facebook, Instrgam etc), sales sites (Ebay, Leboncoin etc) and other networking sites such as Airbnb and Blablacar. After researching, analysing and modelling fraudulent behaviour, the tax authorities can then use this data. They do not however have unlimited power, they are subject to the CNIL (National Commission for Freedom and Information Technology) and Parliament, to whom a report must be submitted in August 2022 and August 2023. The data mining can only be used to track non disclosed business activities and false declarations of off shore domiciles. Only “deliberately divulged” information can be collected and used, access to which does not require a password or subscribing to the website. Private posts or comments from third parties cannot be used. The data must be erased after 30 days if it isn’t going to result in an investigation. Data on sensitive subjects such as political views, religious beliefs and health information must be erased after 5 days on the same grounds. Whether this experiment will be extended or not remains to be seen but in the meantime it is another reason to be careful what you put out on publicly accessible social media.

If you have any questions or would like to speak to me about any of the points mentioned above please do let me know. Thank you to those who have got back in touch after reading my Ezine or have let me know that you are still enjoying reading these emails.

If you would like to receive my monthly ezine,
please sign up below

Is your money safe under the mattress?

By Katriona Murray-Platon
This article is published on: 5th March 2021

05.03.21

March is my favourite month of the year, not least because I celebrate my birthday during this month and this year will be the end of my 4th decade. Traditionally it has always been a busy month because it is a great time for events and starting new projects. This month my colleagues and I will be attending another virtual property fair hosted by Your Overseas Home. The event we did last year was very good and lots of people were able to see our presentations and then chat to our advisers from the comfort and safety of their own homes.

By October 2021 I will have lived in France for 18 years continuously, but I first arrived for my Erasmus year in September 2001 making it 20 years since I started living in France. As you may know I am married to a Frenchman and I have adopted much of the French culture and way of life. But my husband and I have very different views in our attitude to risk and finances. My husband came from a farming background where money was hidden under the mattress, you only bought when you had the money and you insured everything that could be insured. My husband will take a 10 year extended guarantee on a toaster! I came from a background where it was common to use credit cards to fund Christmas and holidays and I went to university with a student loan.

The idea that money is safe under the mattress or in the bank is no longer true. In France the traditional popular savings accounts such as the Livret A and LDD now only have an interest rate of 0.5%. The other misled belief that French assurance vie policy holders have is that Euro Funds are a good investment and a safe investment. Whilst it is true that Euro Funds are still one of the least risky investments after the traditional bank savings accounts, their performance continues to drop year after year. The average growth rate of the Euro Funds in 2020 is 1.2% which, once you deduct social charges (17.2%) and take into consideration inflation (0.5%), the net gain is only 0.5%. One of my own French assurance vie policies, which is 69% Euro Funds, has made an average of 1.6% over the seven years since it was created. The problem with French assurance vies is that they are not bespoke; they come with certain formulas, some that you can contribute to monthly, some that you cannot, and depending on your choice you cannot go lower than the prescribed amount in Euro Funds, no matter what your risk profile.

When I compare this with the range of product providers we can offer our clients and the choice of funds, the difference is astounding. Thank goodness that as English speakers we have access to better investment possibilities from as little as £20,000/€25,000. The average performance of my clients’ portfolios is around 3% after charges, with no social charges taken at source, and they have a lot of choice and flexibility regarding which funds they want and how much of that fund they want their investment to be in. They also have access to English speaking product providers, English speaking fund managers and their own English speaking financial adviser who is supported by the knowledge and experience of all of the Spectrum advisers.

I am fully integrated into French society and believe in adhering to many things about French society, but when it comes to finances there are differences between us that we cannot ignore so it is not in our best interest to invest in French financial products.

The outlook this March is thankfully much better than last March. There is more good news for Prudential policy holders. At the end of February Prudential announced no changes to the Expected Growth Rate and upward Unit Price Adjustments in the PruFund Growth Sterling, PruFund Growth Euro and PruFund Cautious Euro funds.

For other funds and the markets in general the outlook is equally positive. “The combination of vaccine roll-out, substantial fiscal stimulus, and elevated consumer savings should drive a sharp recovery in economic and earnings growth,” said Ryan Hammond, a Goldman Sachs strategist, in a report this week.

Whilst mask-wearing and social distancing will still be necessary for some time to come, a lot of our friends and family members have been vaccinated, therefore reducing the risk to the most vulnerable. With the coming good weather, meetings and get togethers will be able to take place out of doors. As always, if clients are happy to arrange a face to face meeting, I look forward to seeing them for outside meetings in their lovely gardens. If however you prefer video meetings or phone calls that is also possible.

Wishing you all a bright, sunny and floral month of March!

How much tax do you pay in France?

By Katriona Murray-Platon
This article is published on: 3rd November 2020

It’s strange to think that this time last year I was in Quebec with my husband and children. Whilst autumn colours in Canada were absolutely splendid, I have really been enjoying seeing the colours of the trees and vineyards in my local area.

France is now in lockdown for at least the month of November. However unlike the previous lockdown schools will remain open and people can still go to work. Although I have become a lot more comfortable working from home online I enjoy my drives to see my clients. If you would like to speak to me about any matter, even if your annual review is not due at this time, please feel free to let me know and I would be happy to arrange a face to face meeting or an online video call. I can come and see my clients because that is my work but it may also be a way of preventing clients feeling isolated when they cannot see other people.

Being flexible is very important at this time. We don’t know what will happen in the future or how Christmas may be celebrated but what we do know is that

1) We have survived lockdown before so we know what works and what needs changing
2) We know that lockdown was effective in bringing the number of cases down
3) We have made enormous progress on understanding the virus and how to treat it, we are also getting ever closer to a vaccine. We just have to keep calm and carry on!

As you know in November, the Taxe d’Habitation is due (by 16th November or 21st November if paid online). This is a tax for all residents of buildings on 1st January. In 2020, 80% of French households will be considered exempt from paying this tax. In July 2019 Macron said in 2021 the higher income households would see a 30% reduction in their taxe d’habitation increasing to 65% in 2022 and 100% in 2023. So basically this tax will cease to exist after 2023.

As regards income tax, the tax levels have increased by 0.2% for the tax on income earned in 2020 to take into account the inflation forecast for 2019-2020. The new tax barriers are:

Between 0 and €10,084	0%
From €10,084 to €25,710	11%
From €25,710 to €73,516	30%
From €73,516 to €158,122	41%
From €158,122	45%

Just how is my tax calculated in France?

If you have looked at your tax statement and wondered how the tax is calculated, you may find the following rough guide to be useful.

If a couple has a total of €30,000 of income, their taxes would be as follows. €30,000 divided by 2 = €15,000

No tax for the first €10,084 but 11% on the difference between €10,084 and €15,000 (€4916 x 11% = €541). This amount is then multiplied by the number of people (or tax parts) so the total tax for this couple would be €1082.

For a couple with €60,000, the income is again divided between them (€60,000/2 = €30,000).

There is again no tax for the first €10,084, the next amount would be €25,710-€10,084=€15 626 at 11% which is €1719.

The difference between €30,000 and €25,710, i.e. €4290 would be taxed at 30% resulting in €1287.

The final tax would be (€1719 + €1287) x 2 = €6,012 total tax.

Once the tax is calculated then the tax reductions for home help expenses or charitable donations are deducted. For more information please request our free tax guide on our website.

If you have French investments or interest earning accounts and your taxable income (as shown on your 2020 tax return for your income earned in 2019) is less than €25,000 (or €50,000 for a couple) for interest, or for dividends €50,000 (or €75,000 for a couple) you must inform your bank or financial institution before 30th November 2020 so that they don’t withhold the 12.8% income tax on your income in 2021.

Wishing you all a wonderful November. Stay home, stay safe, stay in touch!

Taxe Foncière – Do you qualify for exemption?

By Katriona Murray-Platon
This article is published on: 8th October 2020

08.10.20

Although it hasn’t felt like it, because we have had such gloriously warm and sunny September, autumn is officially here! October is a special month in my household because it’s my son’s birthday and also Halloween which my very French husband has officially and fully adopted as his favourite annual event (the children rather like it too)! However I feel that two topics that must be covered this month are taxe foncière which needs to be paid by 15th October and of course banks.

Taxe foncière is a tax paid by property owners on the 1st January of each tax year. Note that it is paid by the owner not the occupant and applies to both buildings (houses or apartments) and land (agricultural or constructible).

If you sell your property or land, the tax liability for that year is apportioned to each party, by the notary, according to the timing of the sale.

You may qualify for an exemption if:

the property is a new construction used as a main residence (the exemption is for 2 years)
you are in receipt of disability allowance
you are in receipt of old age allowance
you are over 75 (depending on level of income)

The tax office may also allow an exemption for unoccupied property which is habitable and normally rented, provided that:

it is unintentionally unoccupied
it is unoccupied for at least 3 months
part or all of the building is unoccupied

However, as the tax reduction is not automatically granted, you have to apply for it and demonstrate that you qualify (with reference to the specific points above).

For more details on the taxe foncière please read the rest of my article on our website HERE.

As I’m sure you will have heard some people have received letters from their banks informing them that some services will not be continued for those resident in the EU. Not all banks are going to discontinue their services but customers of Barclaycard in particular have been told that this service will no longer be available to them.

If you find yourself in this situation or you are concerned about having a UK sterling account when you move to France and after 31st December 2020, please do get in touch. Spectrum has worked with Standard Bank for many years and they provide an excellent service to expats living in the EU.

Some key points to note are that:

They do not charge to receive funds into the bank
UK Sterling to Sterling transfers are done by BACS so there is no charge
Clients can set direct debit transactions up from their debit card at no charge
Standing orders can also be set up on the account and again there is no charge for Sterling to Sterling in the UK

As with any financial decision it is always best to get advice and recommendations from a certified, regulated financial adviser. So if you want to know more about Standard Bank please do get in touch or if you know anyone who is worried about their UK banks after Brexit, feel free to pass on my details.

Fun fact of the month:
In France a popular savings account, in addition to the very popular Livret A account is the LDD or Livret de Development Durable. This savings account actually began in 1983 and was called a CODEVI which stands for an account for industrial development, it allowed clients to put away short term savings which the bank used to lend to the French industries to ensure funding and modernisation. At the time the interest rate was 7.5%!!! In 2007 this account changed its name to become the LDD and it now only makes 0.5% interest. Since 1st October 2020 those with these accounts can request that part of their savings be used to benefit social economy and solidarity organisations.

Finally, if you haven’t seen the article that I wrote last month on the Spectrum website about Assurance Vies in France, you can find it on my page HERE.

Wishing you all a wonderful October!

Which Assurance Vie is best?

By Katriona Murray-Platon
This article is published on: 7th September 2020

In answer to the question of where do you put your money for maximum tax efficiency, an assurance vie is certainly the best place to put it. The French have continued to favour this investment over the years. According to the French Insurance Federation (FFA), in 2019 the premiums paid into assurance vies increased by 3.5% in 2018, to a total of €144.6 billion. I subscribe to a French financial magazine and every year they do an article on the best assurance vies in the market. This gives me an interesting insight into which products are recommended for the typical French investor.

What is interesting to note is that it is very rare for bank assurance vies to appear in this list. Banks have several assurance vie products under different names with different offers and it can be hard for the consumer to understand and compare performance and costs. Every member of my household, including my children, has an assurance vie, because even after social charges on the part in Euro funds, they are more likely to outperform any cash savings accounts. For example, the Livret A (the preferred savings account of the French) and the LDDS now only pay 0.5% interest per year and any other savings account offered by banks only generally offer between 0.2-0.3% interest which is not exempt from tax and social charges.

The French tend to favour investments in Eurofunds, believing them to be a safe option. Whilst this may be true if the investment horizon is less than three years, in the longer term inflation has a negative effect. The days of glory of the Eurofunds was around 2013-2014 when rates reached 2.5%. In 2019 the average rate on Eurofunds was 1.5% compared with 1.8% (net of fees) in 2018. However when compared with inflation, which was 1.8% in 2018 and 1.1% in 2019, there wasn’t much ‘real’ growth. Social charges are taken at source on such investments which further impacts performance. If your investment horizon is over three years and closer to between five and eight years then you should be investing at least partly in equities to produce a positive return above inflation. If it’s security you are looking for, the more diversified your assets, both in terms of asset classes and geographical location, the better your portfolio will be to weather market fluctuations.

The advantage with bank assurance vies is that you can start with smaller amounts to invest and build up with regular monthly amounts. However as a financial adviser with a high level of French, even I find it difficult to understand what exactly is in these assurance vies and where the underlying investments are held. Usually you are given the option of eurofunds and euro equities. It is rarely possible to hold assets in a different currency. We work with assurance vie providers who can allow you to hold assets in sterling and dollars as well as euros, which would allow you to leave this money to beneficiaries living in the UK or the US and avoid transferring the money into euros at today’s exchange rate. If you wanted to invest in euros but are holding sterling, over time it can be switched into euro funds at the appropriate time and with advice from your financial adviser.

It is not easy to change assurance vies. The French government changed the rules at the beginning of last year allowing people to change contracts but only with the same insurer. However this depends on whether the insurer will allow you to change contracts and whether they have anything better to offer.

If you are in your 40s, 50s or 60s and your investment horizon is longer than eight years, and if you find that your assurance vie is not performing as it should, or you no longer get the proper advice/service from your financial adviser/assurance vie provider, you could consider encashing the policy and finding a better investment. Professional guidance from an authorised financial adviser is essential to determine whether this this option is appropriate for your circumstances.

If however you are over 70 and set up the assurance vie before 70, or you set up the assurance vie over eight years ago and are benefitting from the income tax abatements of €4600 per person (€9200) per couple, it may not be in your interest to change assurance vie providers. There are still many benefits of setting up a small assurance vie after 70 to benefit from other abatements, but that will depend on your situation and you should discuss options with your financial adviser.

I would always advise speaking to a financial adviser before going into any investment whether French or foreign. You need to be aware of the past performance of the investment (although this is no promise of future returns), the reputation of the investment company and the costs and how this may affect investment performance. For more information about assurance vies in general please see our guide but if you are considering this type of investment please do contact your local financial adviser.

What type of recovery do we foresee?

By Katriona Murray-Platon
This article is published on: 29th June 2020

29.06.20

The days are long and sunny and lots of people are looking forward to beginning their life in France! June is a very busy month here in France because with the school holidays starting on 1st July and lasting until the end of August, June is the last few weeks to get everything done before most people go on holiday.

June has felt like a very busy month for me, with lots of meetings with future clients on the telephone, Zoom meetings and webinars. On 12th June I attended the Tilney Women’s Panel Event hosted by Tilney with guest speakers Emma Sterland (Tilney), Zahra Pabani (Irwin Mitchell LLP), Marcie Shaoul (Rolling Stone Coaching) and Charlotte Broadbent (Charlotte Loves), which was a great way to end the week listening to other women’s experiences of lockdown. Then, on 17th June, I took part in a seminar examining financial planning solutions for American expatriates, which was very interesting.

I finally got back on the road again on 18th June to visit a few clients, which was lovely. Whilst the weather wasn’t as great as I might have hoped, I was very happy to see the in-real-life faces of my clients, whilst keeping a respectable social distance during the meetings.

During what has become a monthly Zoom meeting with colleagues this month, we were joined by Rob Walker from Rathbones who gave us an interesting view on the three possible scenarios that Rathbones are envisaging:

1) that there will a V shaped recovery
2) that there will be a progressive recovery but no second wave of the virus
3) that there will be a second wave and a second lockdown.

When asked to vote on which of these three scenarios seemed the most likely, about half of us suggested the second scenario and the other half opted for the third scenario. Rob told us that there has been a bias towards “stay at home stocks” with Amazon and eBay doing very well, if not for any other reason than people could not get to the supermarket during the lockdown so tended to favour ordering online. Cleaning products stocks have done very well as one can imagine. National Grid has also done very well and in addition is increasing its attention on renewable energy, which is unsurprising given widespread and growing interest in Environmental, Social & Governance (ESG) investing. Then there are the “Go back to work” sectors, such as retail, commercial property and tourism, which can only thrive if people do in fact go back to work.

In a possible indication of what lies ahead, Berkshire Hathaway (the company founded by renowned and highly successful investor Warren Buffet) has massively sold its holdings in airline companies. If a vaccine is found then these companies will see a rebound, but given the timing for a workable approved vaccine, this may not happen any time soon. Whilst US tech stocks are doing very well and have done very well during lockdown, Rob’s position is “Be defensive. This is no time to be heroic”.

There is no consensus on the way forward. The question is, do we want to go back to working the way we did before? For many workers going to work involves lengthy commutes on packed trains and buses, whereas the last few months have shown that many

of us can do our jobs from the comfort of our homes.

If this is a work revolution and companies decide to change their business models and allow employees to work more from home, what will be the consequences for commercial property ?

During the second part of the year the focus is going to be on Brexit and the US elections. Donald Trump is desperate to be re-elected. However, has the BLM movement hurt his chances? Will this encourage black voters to go out and vote to put Joe Biden in the Whitehouse? And in the UK, once the situation with Covid19 improves, the focus will be back on Brexit and what kind of deal the Prime Minister can agree with the European Union, if at all. The next six months are going to be interesting.

In France, a month after lockdown restrictions started being eased, the number of cases in the south west of the country still remains low. Schools have gone back with so far very few consequences.

Whilst July is a summer month, I will continue to work as normal (new normal). My children will continue to go to a holiday club two days a week. Like many of you, I am waiting to see whether a trip back to the UK to visit family will be possible in August which will determine our summer plans. I will not do a newsletter at the end of July but will probably do one at the end of August/beginning of September.

So for now, I wish you all a pleasant summer and look forward to getting back on the road to see even more clients in September!

There’s only two things you can be certain of in life…

By Katriona Murray-Platon
This article is published on: 2nd June 2020

In France they have an expression “En mai fait ce qui te plait” which translated means that in May you do as you please. Well clearly this year we haven’t been able to do exactly as we please but we have been allowed a bit more freedom since the end of lockdown on 11th May. I haven’t yet felt the need to take advantage of this new found liberty, but as the children returned to school under acceptable conditions at the end of last week our work/home/school routine is set to change.

May is also tax season. Whilst you can get online to do your tax return in April, I personally have always preferred to do it on 1st May and during the month of May I notice an increase in client enquiries. Even though, in my previous role as a tax adviser, I used to do several hundred tax returns for our English speaking clients, I still find myself getting nervous when I do our annual tax return. There are so many bits of information that need to be assembled and I want to make sure that I have all the income, expenses and tax reductions properly entered before I finally press send.

May is a good time to think about not only your tax but also your taxable income. When I worked in the accountancy firm, my colleagues and I didn’t have time to think about whether a client was paying TOO much tax or not. We just took the information provided and entered the figures in the boxes. When I joined Spectrum I realised that, as a financial adviser, I could take the time to sit down and do a full financial review with my clients to look into whether it made sense for them to be paying so much tax. One thing that comes to mind is UK ISAs and investment portfolios.

They are not tax efficient in France and a real headache for anyone or their tax adviser to have to work out. It took hours of entering in each dividend, interest and capital gain. You can still own a well diversified, multi asset portfolio within an assurance vie wrapper and save time and money when it comes to completing your tax return.

If you haven’t done your tax return then there is still time to do so. You can get our free tax guide HERE. In 2020, all households must do their tax returns online if they have internet access at home. If not they can submit a paper return. You have until 4th June if your live in Departments 1-19 or if you are non-resident, 8th June for Departments 20-54 and 11th June for Departments 55 to 974/976.

As regards the markets, global share prices have recovered strongly over recent weeks, with many investors encouraged by central bank interventions, including ongoing financial support and stimulus for individuals and companies. The prospect of successful vaccine development and the easing of lockdown restrictions have also fuelled optimism. Some of this investor enthusiasm, and expectations of a rapid economic recovery, may well be misplaced, but short term stock market direction is of course impossible to forecast.

There is almost certainly more economic difficulty ahead, but there will in time be a recovery (the only question is timing) and, as always, it is important to take the long term view. For now, our priority should be to ensure that our investments and pensions continue to be well managed regardless of the difficult economic circumstances.

In the words of Julian Chillingworth, Chief Investment Officer of Rathbones, one of Spectrum’s approved multi-asset fund managers,
“We think it’s important that investors concentrate on understanding which businesses can survive this current crisis and quickly return to generating meaningful profits and paying dividends. This is where we are concentrating our research efforts, generating ideas for our investment managers to use in portfolios as we work our way through this crisis.”

May has been a busy month with Zoom meetings with colleagues, friends and family and telephone meetings with clients and prospects. However as lockdown has now ended and my children are back at school (for at least two days a week), I will be tentatively making a few face to face meetings in June if my clients so wish whilst taking all the necessary protection measures.

If you want to speak to me about any financial matters or you know of anyone who, having moved to France, would benefit from learning more about managing finances in France, please do get in touch.

Guardianship for your Children

By Katriona Murray-Platon
This article is published on: 11th April 2020

11.04.20

Being the mother of two small children and the aunty of several more, like many parents, the issue arose quite early of what would happen to my children if something were to happen to my husband and I and what would happen to my sisters’ children should something happen to them. Whilst I don’t need to make a will from an inheritance tax point of view, because I have two children with the same father (my husband) and French law states that my half of our assets would go to my children as bare owners (nu propriétaire) and my husband as beneficiary (usufruitier), I do need to make a will regarding my wishes for my children’s guardian.

The first question is a personal one. Who, in your family or friends, would be best placed to be able to raise your children, in the country you want them to be raised in, in their language, in the way you want them to be raised? Do(es) this person(s) have children of their own? There are a range of different questions that are all particular to your situation. If you intend to appoint someone to be a guardian, then you should talk to them about it and maybe, if possible, talk to your children about it.

The second issue is the legal aspect. There are two ways to appoint a guardian in France. Firstly, you can appoint them in your will, or you could appoint them using a special declaration. Either way a notary needs to be involved. If no guardian is appointed by the parents, under aged children will be put under the protection of the court. A “Family council” will be appointed by the Guardianship Court (Juge des tutelles). This Family Council, made up of a minimum of 4 people, will have the responsibility of appointing a guardian (if one hasn’t already been appointed) who can be a member of the family or someone outside the family. Even if a guardian has been appointed but this person is unable to either adequately care for the child or properly manage the child’s assets, the matter can be referred to the court and another family member can chose another guardian.

If a child loses one parent then it is the other parent who will have parental responsibility. This parent can either care for the child themselves or appoint a guardian, who can be a member of the family or a close friend. If the parent is unable or incapable of looking after the child, then another guardian can be appointed by the court.

The third aspect is the financial aspect. If something were to happen, would the guardian have the financial means to look after the child(ren)? One thing you can do is make sure you have life insurance (called death insurance in France) which will pay out a lump sum and/or an annuity to the children for the rest of their childhood. Often when you purchase a house there is loan insurance that will cover some or part of the value of the house upon death of one or both parents. However, it may not be convenient or possible for the child to be raised in the family home and property as an asset is difficult to manage. Other liquid assets can be kept in bank accounts like Livret As or LLDs, but large lump sums (like the proceeds of a house or the lump sum from insurance upon death) should be placed in an assurance vie in order to protect it from inflation.

Luckily it is uncommon that a young child would lose one or both parents, but it is something that plays in the back of the mind of many parents so it is better having things in place to decide, who, how and with what means someone would look after your child in the best possible way.

Being prepared for BREXIT in France

By Katriona Murray-Platon
This article is published on: 11th March 2020

On 31st January 2020, the UK left the EU. However, the real effects of Brexit, for those of us living in France, will not properly be felt until after the 31st December 2020 (what an interesting New Year’s Eve that will be!) and thereafter. Hopefully, by that time we will have a clearer idea of what our rights and responsibilities are. Until then there will still be much speculation and media noise, which may be just as confusing as it has been over the past four years.

One thing Brexit has established, from the very beginning, is that British citizens living in France, or planning to settle in France, need to get their affairs in order and decide where they would like to live for the foreseeable future. As British citizens we can always return to the UK if we so choose, but if we want to continue to live in France we must show that we have lived here continuously for the last five years or that we intend to continue living here in future.

The next few months are going to be very interesting and it is more than ever important for British citizens to consider some important financial changes.

Pensions after Brexit
In 2006, the UK introduced a law making it possible for UK private pension benefits to be transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS), provided that the overseas scheme meets certain qualifying conditions.

For those pensions that can be transferred there are many benefits including:

No obligation to purchase an insurance company annuity, at any time
The potential to pass on the member’s remaining pension assets to nominated beneficiaries on death with minimal or no death duty payable. By comparison, currently a tax charge at the beneficiary’s marginal rate can be applied in the UK, where the member is over age 75 at death
A wider choice of acceptable investments offered, compared to UK pension plans
The underlying investments and income payments can be denominated in a choice of currencies, which can potentially reduce exchange rate risk
Potential to receive a larger amount of Pension Commencement Lump Sum compared to UK schemes
Depending upon the jurisdiction where the QROPS is set up, income payments may be made without the deduction of local taxes, meaning that income will only be taxed in accordance with the law of the jurisdiction where the member is resident

In 2017 the UK government announced its intention to introduce a new 25% Overseas Transfer Charge (OTC) on QROPS transfers taking place on or after 9th March 2017. This charge does not, however, apply where the QROPS is in the European Union (EU) or EEA and the member is also resident in an EU or EEA country (not necessarily the same EU or EEA country) and remains EU or EEA resident for the next five full UK tax years.

Many of those who work in the industry believe that after the transition period, it may no longer be possible for British citizens to transfer their pensions into an EU QROPS without incurring the 25% charge.

QROPS may not be suitable for everyone and much will depend upon the nature of the UK pension benefits being considered for transfer, as well as the person’s attitude to investment risk. Transferring a pension to a QROPS is not a decision that should be taken lightly nor in haste and proper financial advice with an experienced adviser is essential. Even when the decision has been made to transfer the pension it may take a good few months to complete, which is why, if you are even considering this possibility, it is important to contact a local adviser to explore what your options are.

Taxes after Brexit
As tax between the UK and France is determined by the Double Tax Treaty, this will not be affected by the fact that the UK has left the EU. However, whilst not directly taxed, a lot of UK income, such as UK rental income, is added to the taxable base and increases the tax margin of the French taxpayer. If you intend to live in France, you may want to consider whether it is really in your interest to hold onto UK assets.

It is possible to protect your capital investments in France and ensure that they can grow in a tax efficient environment by way of an Assurance Vie policy. French Assurance Vies or French approved foreign Assurance Vies offer valuable benefits when it comes to income tax, inheritance tax and estate planning. Foreign portfolios and bonds are not treated as Assurance Vies and any gain is subject to tax and social charges irrespective of whether this income is taken or whether it is brought into France. If you are French tax resident, you are taxable on your worldwide income in France. Proving that you are French tax resident will be an important factor for establishing the Right to Remain in France.

Being resident in France does not necessarily mean that all your assets have to be in France or have to be in euros. There are many opportunities for holding sterling based diversified portfolios in a tax efficient manner.
For anyone intending to live in France for the foreseeable future, be aware that today’s valuable financial planning opportunities are unlikely to remain beyond the short term (31st December 2020 could be an important date in this respect). Contact me, Katriona Murray, and I will be happy to arrange a meeting.

Brexit – What now?

By Katriona Murray-Platon
This article is published on: 18th December 2019

Some of you, like me, might have woken up on Friday and after hearing the election result felt utterly depressed. Irrespective of how the vote could or should have gone, or who you may have voted or wanted to vote for, this result will seriously affect the Brits living in Europe. Brexit is now more likely than ever, so what does this mean for us? Well luckily, there is someone who is somewhat of an expert on the matter, Professor Sébastien Platon, Professor in European Law at the University of Bordeaux and incidentally my husband! Over breakfast I asked him a few questions.

So, what now?
The British parliament must first pass the EU (Withdrawal Agreement) Bill, and then they have to agree on the Withdrawal Agreement itself. Given that the Conservatives now have a majority it is likely to be passed. Either later or at the same time, the European Parliament also has to agree on the withdrawal agreement. If all of this gets done by the 31st January, Brexit will happen as planned. If not, the UK will have to request ANOTHER extension which would have to be agreed by the other 27 member states.

During the transition period are all European rights maintained?
Apart from the right to vote and run as a candidate in EU elections and municipal elections, the right to participate in European citizens’ initiatives and the UK’s right to vote on EU laws, all rights, including the right to free movement, are maintained during the transition period.

Does a British citizen who has not yet settled in France still have the right to do so after 31st January?
Yes. Up until 31st December 2020 all British citizens can come and settle in the EU. After the transition period, those who have established residency in the EU and wish to bring their family members (spouses, partners, direct descendants under 21 or dependent, direct relatives in the ascending line) to live with them can still do so.

Can the transition period be extended?
Yes, if the UK and EU agree to extend the transition period. But, unlike the Brexit extensions, they cannot ask for an extension the night before the 31st December 2020. A decision has to be made before 1st July 2020 extending the transition period for up to 1 OR 2 years. British citizens would therefore have until the end of the transition period (or extended period) to settle in the EU.

What about healthcare?
During the transition period, the EU social security coordination rules will continue to apply. The British who reside in France (or any other member state) and are in the UK health system but not the French health system can continue to benefit from this health cover as normal. After the end of the transition period, these rules will continue to apply to:

• UK nationals subject to the legislation of a Member State at the end of the transition period,
• UK nationals who reside in a Member State while being subject to the legislation of the UK at the end of the transition period,
• UK nationals who pursue an activity as an employed or self-employed person in one or more Member States at the end of the transition period and who are subject to the legislation of the UK,
• Their family members and survivors
These persons will be covered as long as they continue, without interruption, to be in one of these situations involving both a Member State and the UK at the same time.

What about pensions?
For the persons I’ve just mentioned, the time worked in the UK will count towards an EU pension and inversely any time spent working in France would contribute towards entitlement for a UK pension should they wish to return to the UK when they retire.

Do we need to apply for cartes de séjour?
During the transition period you do not need them. After the transition period each member state has the right to require UK citizens to apply for a new residence status, the sole purpose of which is to verify whether the applicants meet the conditions set in the withdrawal agreement. If they do, they have a right to be granted the residence status and the document evidencing that status (which will NOT be a “carte de séjour”). The French administration cannot refuse this status if you meet the conditions. The deadline for submitting the application shall not be less than 6 months from the end of the transition period. The host State has to ensure that any administrative procedures for applications are “smooth, transparent and simple, and that any unnecessary burden are avoided” with applications being “short, simple, user friendly and adapted to the context of” the agreement. Only once the agreement has been ratified will we know if and how the French Government wants to proceed on the matter.

Whilst I do not agree with Brexit and wish things had happened differently, at least after four years of uncertainty there may now be some progress. The pound bounced back up on Friday and this election result is likely to have a positive impact on the markets and portfolios.