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Spectrum on Talk Radio Europe

By Charles Hutchinson
This article is published on: 20th June 2014

Spectrum Adviser Charles Hutchinson was interviewed for Talk Radio Europe

You can listen to the whole interview by clicking on the link below

The Spectrum IFA Group at TED Event

By Victoria Lewis
This article is published on: 17th June 2014

Victoria Lewis, one of Spectrum’s advisers in the South of France and Paris, was recently nominated to participate at a TED event (www.ted.com) in Grenoble.

“It was an honor and a privilege to be nominated as a Speaker by TED, especially when I discovered one of the other speakers was a Nobel Prize winner! I was asked to speak about the global pension situation and the problems faced today by those people wishing to retire early.”

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“TED imposes strict rules on the talk format and each presenter must speaker for 18 minutes. There was an international audience of 300 people, many of whom were executives from international companies, entrepreneurs, scientists and university undergraduates. Fortunately, there was time during the event to answer specific questions from the audience and it was clear that most people had a real interest in improving their financial well-being. “

What’s TED?

TED is a nonprofit organization devoted to ‘Ideas Worth Spreading’. Started as a four-day conference in California 25 years ago, TED has grown to support world-changing ideas. The annual TED Conference invites the world’s leading thinkers and doers to speak and their talks are then made available, free, at TED.com. TED speakers have included Bill Gates, Al Gore, Jane Goodall, Sir Richard Branson, Philippe Starck, and UK Prime Minister Gordon Brown. TEDTalks are posted daily at TED.com.

Le Tour de Finance 2nd leg in France

By Spectrum IFA
This article is published on: 13th June 2014

Le Tour de Finance is getting ready for its second leg starting on 17^th June in Saint Loup sur Thouet. The Tour then weaves its way through Vannes le Port, Tours and finishes in Dijon on 20^th June.

The first leg of the tour was a great success, with large numbers attending all the events with fact filled sessions followed by an opportunity for an informal questions and answers session over refreshments and a buffet.

The relaxed and open forums are a chance to expand your knowledge of personal finance as a resident in France. The panel of speakers are experts in their respective fields and are there to answer questions you may have about strengthening your personal financial situation while a resident in France.

The Spectrum IFA Group is a European leader in professional personal financial advice and will be covering subjects such as; QROPS, pensions, tax advice, investments and wealth management, healthcare, and mortgages.

Le Tour de Finance is an excellent and relaxed forum in which you can get those important questions answered, plus mingle in a pleasant atmosphere with other expat residents whilst enjoying a complimentary buffet lunch. The free sessions commence at 10.00 and will finish at 14.00.

Le Tour de Finance 2014 second leg:

17th June – Chateau Saint Loup, Saint Loup sur Thouet, 79600
18th June – Mercure Vannes le Port, 56000
19th June – Chateau de Beaulieu, Tours, 37000
20th June – La Cloche Hotel, 14 place Darcy, Dijon, 21025

For further information and to book your place please visit: https://spectrum-ifa.com/seminars/

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QROPS and expats living in France

By Spectrum IFA
This article is published on: 12th June 2014

As part of the March 2014 budget substantial changes to UK pension legislation have been proposed by the UK government, and here our Financial Expert Steven Grover a Partner with the Spectrum IFA Group will guide you through these proposals and what consequences they could have for expats.

So what are the changes that have been proposed and which of these changes have already been adopted ? The majority of the proposed changes are already effective as of the 27 March 2014 which include the following:

New higher income drawdown limits – Drawdown investors have a yearly limit to the income they can draw which is from zero up to the maximum, The maximum amount has increased by 25% (from 120% to 150% of a broadly equivalent annuity) So for instance, an investor aged 65 with a £100,000 pension starting drawdown before these changes could draw a maximum income of £7,080 a year. However if they start from 27 March 2014 this will rise to £8,850.

Flexible drawdown made more accessible – Flexible drawdown allows investors to make uncapped, unlimited withdrawals from their pensions. There are, however, strict qualifying criteria. The main one is that you must already have a secure pension income of at least £12,000 (prior to £20,000 before).

However the £12k income must be “relevant income” so only the following will count:

State Pension, Scheme Pension (so a final salary pension which is fixed), Lifetime annuities, Overseas Pensions (but only overseas state pension or final salary), Pension income provided by the Financial Assistance scheme.

And the following income would not be included as they can change, capital can be spent, investments sold, drawdown income can finish – Rental income, Dividends, Interest, Drawdown pension income, QROPS income, Part time salary.

More flexibility for investors with pension small pots – Now investors aged 60 or over with total pension savings under £30,000 (formally £18,000) will be allowed to draw them as a lump sum. The first 25% will be tax free (in the UK but this may not be the case for French tax residents), and the remaining amount will then be taxed as income. This can only be done once. Investors with individual personal pension pots smaller than £10,000 (formally £2,000, twice) will be allowed to draw them as a lump sum from age 60, which will be taxed as above but can only be done three times.

The following changes have however not come into force and are still in consultation:

Pension Investors will be able to take the whole of their pension as a lump sum (Potentially effective from April 2015) – Currently most investors aged 55 or over can take up to 25% of their pension as tax-free cash (in the UK but this may not be the case for French tax residents), and a taxable income from the rest. There are, however, rules that determine the maximum income most people can draw each year. These restrictions will be removed in April 2015 so pension investors will be able to take the whole of their pension as a lump sum if they so wish, subject to consultation. The first 25% will be tax free (in the UK but this may not be the case for French tax residents), whilst the rest will be taxed as income. Should this come to fruition, it takes away one of the most cited objections to funding a pension.

Lump Sum Death Benefits – The 55% tax charge on certain lump sum death benefits will be reviewed. The Government believes that a flat rate of 55% will be too high, and will engage with stakeholders to review the rules to ensure that taxation of pensions on death is fair under the new system.

QUESTIONS & ANSWERS

What exactly is the government consulting on?

The government is consulting on “Freedom and choice in pensions”. The consultation relates to whether the proposed changes will happen and how. The main points which affect investors with private pensions are:

Ability to take unlimited income from pensions (from age 55, rising to 57 in 2028). The first 25% remains tax free, whilst the rest is taxed as income.
Review of the 55% tax charge on death in drawdown/post 75.
Review of the tax rules that prevent individuals aged 75+ from claiming pension tax relief.
Increase in minimum pension age from 55 to 57 from 2028 and further rises after that so it remains 10 years below state pension age.
A consumer’s right to financial guidance at retirement. • Potential use of (yet to be developed) pension products for social care.

What is the timetable of the consultation?

The consultation will close on 11 June 2014 and the government aims to confirm any changes by 22 July 2014, these changes will potentially be effective from April 2015.

Can I take my pension as a lump sum?

Potentially, yes you could. However it will depend on your individual circumstances and the decision made after the consolation period has closed.

From 27 March 2014 some investors aged 60 or over will be able to take their pension as a lump sum if:

▸ Their total pension savings are under £30,000 (only once), or

▸ They have individual personal pension pots smaller than £10,000(maximum three times)

From 27 March 2014 some investors aged 55 or over will be able to take unlimited withdrawals from their pension (through flexible drawdown) if they can prove they have a secure pension income of at least £12,000 a year (including state pension), instead of 20,000 a year.
From April 2015, if the changes above are confirmed after the consultation, everyone will be able to take their pensions as a lump sum.

What happens to investors already in drawdown?

Investors who started income drawdown before 27 March 2014 will remain on their current maximum income until their next annual review date. If the three yearly GAD calculation is due at that review, their maximum income will be recalculated based on the current fund value and that month’s GAD rate. They will then be eligible to take 150% of the new GAD limit. Clients not due a GAD calculation will simply move from 120% to 150% of their existing GAD rate at their next annual review. These same existing drawdown clients may potentially have their maximum income restrictions removed completely in April 2015 if the proposed changes are agreed following consultation.

What happens to investors who have already bought an annuity?

An annuity cannot usually be cancelled once set up, so you are unlikely to have any further options. However, you typically have 30 days to cancel (cancellation period). The start date of the cancellation period will depend on the terms set out by your annuity provider. Some providers are extending their cancellation period.

So with all of the above changes potentially changing drastically changing the UK pension in Industry, will a QROPS now be less relevant to Expats living in France?

First of all what is a QROPS?

QROPS (Qualifying Recognised Overseas Pension Scheme) was brought about following changes to UK pension legislation on April 5, 2006. This scheme has been specifically designed to enable non-UK resident individuals who have accrued pension benefits in the UK, to transfer these out once they have left the UK. Provided that the UK Registered Pension Scheme and the QROPS provider both have the appropriate transfer authority, individuals who leave the UK and establish a QROPS are able to request a transfer of their UK benefits as long as they can provide evidence they are no longer a UK resident.

Due to the fact that this scheme is an international contract, future benefit payments can potentially be received without deduction of UK tax, however individuals will be responsible for declaring the income in their own country of residence. So those who have moved to France to retire or are thinking about moving to France in the future, and have private or work pension benefits that would have normally been left behind in the UK can benefit from a QROPS Transfer.

What are the key benefits of a QROPS over leaving the pension in the UK?

Pension Commencement Lump Sum – With a QROPS approved scheme the amount of PCLS available at retirement can be up to 30 percent, compared to the 25 percent allowed with a UK pension however this does depend on which one of the approved jurisdictions is used.

Inheritance tax planning – Most people would like to think that, upon their death as much of their assets as possible would be passed on to their heirs. It is a complex issue, however, by transferring to a QROPS the taxation of pension benefits on death can be much less punitive. With the current UK pension rules a UK pension scheme could be a taxed up to 55 percent of the fund value before being passed on. By bringing the pension out of the UK and using a QROPS approved scheme, this tax liability can be greatly reduced or in some cases even wiped out completely.

Age benefits can be taken – Some QROPS jurisdictions will allow you to start taking benefits from your pension at the age of 50, as apposed to 55 years old in the UK.

Currency risk – This is a very important consideration for expats who have retired in France with UK pensions that will pay their pension benefit in sterling, because this means they not only run an exchange rate risk but also will incur charges for converting their pension benefit payments into Euros. By putting your pension into a QROPS you can receive your pension benefit payments in Euro’s and therefore eliminate any exchange rate risk, currency conversion charges and have peace of mind that the amount of income you receive each month will be the same.

Investment choice – By moving an arrangement out of the UK there can be a much wider choice of investments available to the pension fund, with a more global focus which is particularly important in the current market conditions as some existing pension schemes can even be limited to just UK investments.

Is a QROPS still relevant to expat’s in France?

This will unsurprisingly depend on your individual circumstances, but some of the changes in the UK like increased drawdown limits have already been adopted by many QROPS jurisdictions. And when you take into account the other advantages mentioned above, using a QROPS still has a many advantages over leaving the pension in the UK. However as part of the proposed changes are subject to UK Government consultation period, for some individuals it might be the case that it is better to wait until these findings have been disclosed.

This information is only provided as a guide and is based on our understanding of current QROPS regulations, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different. If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)687980941, e-mail steven.grover@spectrum-ifa.com

More pain and no gain from interest rates

By Spectrum IFA
This article is published on: 10th June 2014

The European Central Bank made headline news again at the beginning of June, as it reduced its main interest rate from 0.25% to 0.15% and lowered its deposit rate into negative territory from 0% to -0.1%.

The reduction in the interest rate makes it less expensive for other banks to borrow from the ECB and ‘in theory’ this should result in credit flowing out to the wider Eurozone community. At the same time, the negative deposit rate means that the ECB will charge banks for keeping their excess liquidity on deposit with it. The thinking is that this should discourage the banks from making the deposits and instead, make the money available for lending to households and business thus, encouraging growth.

These measures are part of a package that also aims to increase the rate of inflation in the Eurozone, which continues to fall, as demonstrated by the change in the Harmonised Index of Consumer Prices for May, when the annual rate of inflation fell from 0.7% to 0.5%. However, there are many who think that the current measures are insufficient to turn the trend from continuing towards deflation and feel that more aggressive action should have been taken by the ECB, including an expansion of Quantitative Easing.

What does this mean for savers? There is only one answer and that is “bad news”. Even if the banks do start to lend more money into the wider community, since they can borrow from the ECB at 0.15% to do this, why would they borrow from the public (i.e. the savers) at a higher rate?

We have been living in a very low interest environment for several years now, although this is the first time that the Eurozone has gone into negative territory in ‘nominal’ terms. In ‘real’ terms (i.e. taking into account inflation), we have already experienced negative returns from bank deposits and even the most cautious of investors are now prepared to look at alternatives.

One such alternative is a particular fund in which many of our clients have already invested. Despite the fact that the fund is conservatively managed, over the last four years to the end of May, the Sterling share class has still been able to grow by more than 36% and the Euro share class by 30%. After taking into account annual management charges on the fund, the three year annualised return is around 7% for Sterling and around 5.5% for Euro. A growth fund is also available for those investors who wish to take more risk and USD share classes are available for both the cautious and the growth funds.

The funds are part of those of a large insurance company, which has a history going back for more than 160 years. The company is well capitalised and so clients feel comforted by the safety of investing with such a solid company.

One of the unique features of the funds is the delivery of a smoothed investment return. On a daily basis, each of the funds grows in line with an expected growth rate, which is the rate of return that the company expects the assets in which the funds are invested to earn over the long-term. This approach aims to smooth out the usual peaks and troughs of investment markets and so is particularly beneficial to investors seeking an income from their capital.

It is a well-known regulatory requirement for product providers and investment managers to tell investors that “past investment performance is not a guarantee of future performance”. Whilst this is true, in reality it is only by looking at the past investment performance of a fund that one can really judge the skill of the fund manager. This is not just about how good the manager is at picking stocks – but more importantly – about how risk is managed, particularly through market downturns. Happily, when I am discussing the above funds with clients, I am able to demonstrate the skill of this insurance company by showing a sixty-year history of positive investment returns on an annualised basis over 8, 9 and 10 year periods. This is another reason why cautious investors – who would have previously only ever placed their capital on bank deposit – are very comfortable about switching to this alternative choice.

The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.

Luxemborg Business Lunch

By Michael Doyle
This article is published on: 8th June 2014

08.06.14

The next Pecha Kucha evening will be held on Thursday, 19 June in Hotel Parc Belle-Vue from 19h00 – 22h00.

Pecha Kucha is an entertaining and informative event giving presenters the chance to “beat the clock”. The idea being that presenters have 12 PowerPoint slides, each lasting for 20 seconds, accompanying their verbal presentation. The slides move on automatically even if the presenter is not ready to move with them.

A free cocktail reception will be held at the end of the presentations to give guests the opportunity to meet the presenters at their trade table and to network. Please note that only registered guests can attend this event and there will be strictly no entry to the venue once presentations have started.

If you would like to register to be a guest at this event please click here.

Only a few presenters places remain, please contact maureen@tbl.lu for information.

For a full list of presenters and for more information please click here

Stick or Twist?

By Spectrum IFA
This article is published on: 6th June 2014

Stick or Twist? Or maybe both? Let me explain.

Thankfully, despite the ups and downs of the UK housing market and the £/€ exchange rate, there are still plenty of new expats arriving in France. It is noticeable though that quite a few of us are taking the decision to return to the UK. At first, this trend surprised me, but then I began to think about it in more detail.

I always have the same conversation with all my new clients. Where do you think you will be living in ten, twenty, or thirty years’ time? The most popular answer is here, in France. ‘Wild horses wouldn’t drag me back.’ ‘I’ve escaped from the concrete jungle, why would I want to go back?’ ‘ I only go back when I have to, to visit relatives. If they weren’t there, I’d never go back.’

That is of course the more entrenched end of the market. A lot of people will qualify their enthusiasm for being here by using the word ‘we’, and it is an important detail, conveying ‘I know where I want to be as long as my spouse/partner is with me, but I don’t know what will happen when that isn’t the case’. And just in the cause of balance, yes, I have met potential clients who said that they were here to try out the lifestyle, and if it didn’t suit, they would go straight back. That stance is however rare.

I then realised that time does, indeed, fly by. I’ve been talking to new expats for over eight years now, and we all get older. Some even wiser. Should I be surprised that some of my early clients have returned to the UK? Probably not. The reasons they give are interesting, and make a lot of sense. Illness and death are way up on the list of reasons to go ‘home’. Not your own death of course, but that of your partner. Widow(er)hood can be a lonely place. And we all know that the French health service is one of the best in the world, but it’s not English, is it? We might feel linguistically comfortable in a restaurant, a garage, or a supermarket, but when it comes to being interned in a foreign hospital with our internal organs at stake, it’s a different matter.

Divorce is another deal breaker, as is debt, but number three in my league table of reasons to be homesick is/are – grandchildren. A natural progression. We have children, they have children, and we feel a very strong emotional tie to those children. Being a thousand miles away doesn’t feel very good, and the pressure grows with them.

Where, you might ask, is this all leading? Am I reading a dissertation on the social demographics of Europe, or is this bloke supposed to be a financial adviser? Fair cop, let’s get back to finance. The reason I’ve been thinking about how and why some clients return to the UK is totally financial. I used to be a corporate foreign exchange dealer. An important part of that job was teaching clients how to avoid exchange rate risk, and how to eradicate it or at least manage it if they already had it. The problem with expats is what is avoiding risk and what is creating it?

If you relocate to France and it is your avowed intent never to leave these shores again, the only way to avoid F/X risk is to move all of your assets into Euro. At the other end of the scale, if you come to France for a three month holiday, you would be mad to change all your sterling into Euro, with the likelihood that you would change it all back again three months later. So where does this leave our undecided expat, who might live in Euroland for twenty years or more, but then return to the UK?

Stick or Twist?

Now my job starts to get a bit complicated. To give you the best advice on your investments and pension funds, I have to decide what your real expat profile is. Luckily for both me and my clients, the choice isn’t all black and white. There are shades of grey. You can indeed ‘stick and twist’ at the same time. I tend to take a different view of pension assets than I do to investment funds. One of the great selling points of transferring your pension fund outside of the UK is that you can invest it in Euros, but if there is even an outside chance that you will be spending your latter years in the UK, should you desert sterling? Don’t think I’m arguing against transferring your pension though. There are plenty of other benefits, and you can transfer and keep your fund in sterling.

Investment funds I see as being more flexible. I’ll take Assurance Vie as a given here. If you don’t know what it is, send me an email immediately. You don’t however have to make any full term commitment to either currency. You can in fact have both, and a number of clients are now taking that option. You can have as many assurance vie contracts as you like. This offers both flexibility of currency choice, and also of investment method.

To summarise then, my message is that it is important to get your investments into a tax efficient environment, but it is also important to decide what currency to be in at what time. I’d like to think that I’m in a good position to help you make those choices. If you have any questions on this, or any other subject, please don’t hesitate to contact me.

Residency & Tax Returns in France

By Spectrum IFA
This article is published on: 4th June 2014

During May, I always receive lots of questions from people about French income tax returns. The most common ones are – should I complete a French tax return, do I have to declare that tiny bit of bank interest on my savings outside of France, do I have to declare dividends even if these are re-invested? If you are French resident, the answer to all of these questions is “YES”. In addition, depending upon the value of your assets, you may need to complete a wealth tax return.

Whether or not French tax returns should be completed is always a popular subject at social gatherings of expatriates and I have heard many people say that they “choose” not to be French resident. Well French residency is a fact and you only have to satisfy one of the following conditions and you will be resident in France:

France is your ‘home’. If you have property in France and in another country, but the latter is not available for your personal use (for example, because it is rented to tenants), then France is your home.
France is your ‘centre of economic interest’. Generally, this means where your income arises. In addition to pension, salaries, etc., this can include bank interest and other investment income.
France is your place of ‘habitual abode’. Notably, no reference is made in the law to the number of days that you actually spend in France and this is where many people are caught out believing that if they do not spend at least 183 days in France, then they can decide that they are not resident. This is not the case and your place of ‘habitual abode’ is, quite simply, where you spend most time.
Nationality. If your residency has not been established by any of the above conditions, then it will be your nationality that determines your residency, however, this is very rare.

So with residency established, when completing a French income tax return, you must declare all your worldwide income and gains, even if some of this is ultimately taxable in another country. If there is a Double Taxation Treaty (DTT) between France and the country where the income arises and that other country has the right to tax certain income, your French tax bill will be reduced to reflect this. If there is no DTT and you pay tax in the jurisdiction where the income arises, then this will result in you being taxed twice. Although France has many DTTs, this is not so with the popular offshore jurisdictions of, for example, the Channel Islands and the Isle of Man.

For those of you who have completed the French tax returns this year, if you had to complete the pink 2047 form, this means that you had foreign income and/or gains to declare. If this is for any reason other than pension income, earnings or perhaps property rental income from outside of France, then you may benefit from a discussion to check that you are not paying unnecessary taxes on any investment income. For example, it may be better to invest your financial assets in an assurance vie, which is more tax-efficient for French residency, when compared to foreign bank interest and dividends.

Inheritance taxes should also not be overlooked. As a French resident, you are considered domiciled in France for inheritance purposes and your worldwide estate becomes taxable in France (except for anything that might be exempt as a result of a DTT), where the tax rates depend upon your relationship with your beneficiaries. However, by investing in assurance vie, in addition to the personal tax-efficiency for you, this type of investment also has the advantage that you can create valuable additional inheritance allowances for your beneficiaries.

If you would like to have a confidential discussion about your financial situation, please contact me by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.

The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter

Le Tour de Finance – a winner again

By Spectrum IFA
This article is published on: 1st June 2014

Last week, my colleague Rob & I presented at two of the South West France venues of Le Tour de Finance. This is a tour that travels around France, where we bring ‘experts to expats’. Now in its fifth year and due to the popularity of ‘Le Tour’, the events take place around the country in both spring and autumn.

Rob and I did a ‘double act’ and gave a presentation on The Spectrum IFA Group, which covered our processes and the products and services that we provide to clients, as well as highlighting the importance of our independence and how we are regulated in France by the French authorities. We also discussed client concerns (tax-efficiency, inheritance tax planning, securing pensions, protection of capital and continuing issues about the security of banks in the Eurozone).

SEB Life International and Prudential International presented on the topic of assurance vie, explaining the tax-efficiency of this type of investment, both personal and for inheritance planning. Each of the companies outlined the unique features of their own products and it could be seen that the products complement each other, one or the other being more suited to a client, depending upon attitude to investment risk.

The Standard Bank provided details of its structured product offerings that are currently available. There are different terms available and there is an element of linking to stock market performance with this type of investment, but all provide a guarantee that at least the original capital invested will be returned at the maturity date. For our clients who invest in these Standard Bank products, when used in conjunction with a particular life company wrapper, the clients benefit from an extra bonus, which is provided in addition to the capital guarantee.

Currencies Direct presented the various options open to clients who wish to exchange currency, whether this is for regular payments or for ad-hoc exchanges perhaps for larger purchases, for example for property. It was very interesting to see how much could be saved by using Currencies Direct, rather than a retail bank. Unexpectedly, as the Sterling Euro exchange rate jumped by more than a Euro between one day and the next over the two days when Rob and I were at Le Tour, currency exchange proved to be more topical than any of us were expecting.

Exclusive Healthcare Insurance presented on the range of products that they can offer clients. This included a range of seven different mutuelle plans that top-up the basic French health cover, which are designed to meet the needs of the different income groups of French residents and the variation in medical costs from region to region. Like all mutuelle insurance in France, there are no underwriting conditions and pre-existing conditions are covered. The company also outlined a different product that provides full private medical insurance, but which is subject to underwriting conditions. However, since the UK will stop issuing Certificates S1 to early retirees from July this year (i.e. for those who are not receiving UK State pensions), this might be a viable option for those who may be affected.

There was a presentation on French succession planning from Heslop & Platt, which is a firm of UK solicitors that are specialists in French law. As many of our clients maintain a connection with their former home country, the importance of ensuring that there is no conflict existing between the wills made in the different jurisdictions was highlighted. In addition, the forthcoming EU rules on succession were outlined and it could be seen that there would still be a need in France for inheritance planning the ‘French way’ to avoid the French inheritance taxes that will still exist even when the EU rules are in operation from August 2015.

New to Le Tour this year was PetersonSims, a firm of chartered accountants based in France, which also specialises in expatriate tax issues. A presentation from their Tax Director demonstrated how much money they could save clients, just by making sure that French tax returns are completed correctly and relief from double taxation is obtained.

If you did not make it this time to Le Tour de Finance, keep in mind the next local events which will take towards the end of June. On the other hand, if you would like to have a confidential discussion now on your financial situation, please contact me by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.

The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter

Capital Gains Tax and the Expat Property Owner

By Lorraine Chekir
This article is published on: 28th May 2014

You have realised your dream, bought a property in France, perhaps as a holiday home to start with but now you have moved here, maybe to work, or perhaps you have retired. The big question is what to do with your property or properties in the UK?

When moving to a new country many people are a little nervous about letting go of their old one, rightly so after all holidaying is one thing, but living in a foreign country quite another. So often people keep their property in the UK, for a while at least, however this can have Capital Gains Tax (CGT) implications on a future sale.

A tax treaty signed between France and the UK which became operative on 1^st January 2010, meaning that for former UK residents now resident in France, they are liable for french CGT on the future sale of any property including your former main residence. However no liability will apply in the UK.

Main Residence
If you sell your UK home when you move to France or within a relatively short space of time (usually within a year) then no CGT will be payable in either France or the UK. If however, you hold into it for a while ( then or rent it out) then you will pay CGT on it in France just like any other maison secondaire, with no allowance being made for the fact that it was your main home for a period of time.

Buy to let
If you sell your UK buy to let property when you move to France rather than at a later date then you will pay UK CGT. To work out how much tax you will have to pay, take the selling price of the property, then deduct the buying price. You can deduct the costs of buying and selling, e.g. solicitor’s fees, stamp duty, estate agents fees, advertising etc. You can also deduct the cost of

improvements to the property but not routine maintenance and repairs. There is also an annual exemption allowance (£11,000 for 2014/2015 tax year). CGT rates are 18% or 28% for higher rate tax payers. HMRC website provides a step by step guide.

Any buy to let properties that you own in the UK and subsequently sell after you become a french resident will be liable to French CGT.

Ownership
An important point to note, if you are married, but your UK property is only in one person’s name, it may be sensible to transfer the property into joint names prior to any sale to reduce any potential UK CGT liability. There is no CGT payable between spouses/civil partners and the CGT calculation on sale will be based on the original purchase price for both parties.

In France Gift Tax applies between spouses and applies to gifts made in the previous 15 years so it is sensible to take advice from a professional before taking any action.

French CGT
Like UK CGT, you start with the sale price and deduct the purchase price plus any associated buying and selling costs and costs of improvements (but not repairs or DIY, invoices need to be provided from registered builders etc). If you have owned the property for more than five years the notaire can apply an allowance of 15% of the original purchase price of the property – even if you haven’t done any work!

For EEA residents the starting rate for french CGT is 19% plus 15.5% social charges however these start to reduce on a sliding scale from year 6 of ownership onwards. After a full 22 years have passed the CGT reduces to nil, however it is 30 years before the social charges reduce to nil. Additional charges apply for gains above 50,000 euros.

Working out when, where and how much Capital Gains Tax you should be paying can be quite a headache and the best thing to do is take advice from a professional.

This article is for information only and should not be considered as advice and is based on current legislation. 25/05/2014.