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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Could you help me with French capital gains tax plse. We brought

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Could you help me with French capital gains tax plse. We brought in 2009 for(###) ###-####euros, nortaire12200 & estate agent 8000. We hope to sell for 270,000 euros. We have a mortgage of 142400 which cost 900 euros to set up.
It's our second home as our main residence is in the UK. We are horrified by the 35.5% and wondered if/how we may be able to reduce it.
I'm aged 55 but work full time but my husband is 65 and retired. He is prepared to live there and registered for tax if it helps but I can't.
Your advise would be appreciated.
.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

A married couple can only have one main residence between them for UK CGT purposes. As you appear not to have made an election for the French home to be treated as your main home within two years of buying it, the question of which of your homes is your main one will be based on the facts. Clearly, as of now, it is the UK property.

As you will see here, there is no discount from the gain until you have owned a second home for six years. Whilst the French CGT itself will be deductible from any UK CGT liability on the gain, the French Social Charge will not as it is not deemed to be a tax by HMRC in the UK. There was talk of a rebate system and there is a spreadsheet calculator you can use here which will tell you what effect that would have on you if that actually came to be part of the law.

I'm no expert on French tax and the rules seems to change frequently because of the chaotic nature of the current French government's fiscal policy but as you will read here, it will be difficult to escape French CGT by claiming to be resident in France and such a move could have tax implications for your other income sources and your UK home were it to be sold which I realise is not the case here. You should seek out expert advice in France but from my understanding of the French tax system and from the notes here, I think you will struggle to make an argument that it is your husband's main home and even if he does succeed, that may not cover the period of ownership to date.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.
Tks Tony I understand we can't do anything about it being our main residence so I have read all the info you sent but sorry one area I'm still not understanding is the 15% for work carried out. We have done loads of work which we can proof with photos but haven't kept invoices as we did the work ourselves. Can we claim for this and how?
In a nutshell are you able to give us a very ROUGH indication of how much the tax will be. We brought the house on 5th November 2009 and it won't be sold before we have owned it for 5 yrs. Would it be worth our while waiting until we've had it 6?
Also we hear the law is being challenged (something about it being a social services cover) so wondered if you have heard about this and when it should be settled?
Thanks for your help.
Expert:  TonyTax replied 2 years ago.
Leave this with me while I do some calculations.
Expert:  TonyTax replied 2 years ago.

Hi again.

FRENCH CGT AND SOCIAL CHARGE

The 15% allowance for refurbishment is given to those sellers who have owned the property for more than 5 years whether any such costs have been incurred or not. It also seems that the claim for purchase costs (notaire and stamp duty) is limited to 7.5% of the cost. I've excluded any selling costs for the purposes of my calculations to give a worst case scenario.

Using the calculator I gave you a link to I have entered the following figures which are in Euros:

Box 1 270,000 sale proceeds

Box 2 178,000 acquisition cost

Box 3 5/11/09 date of acquisition

Box 5 13,350 automatic purchase costs allowance (7.5% of purchase price)

Box 14 26,700 automatic refurbishment costs allowance (15% of acquisition cost)

Boxes 18 and 30 51,950 net gain(sale after 5/11/14 and by 4 November 2015

Box 38 CGT at 19% 9,871

Box 46 Social charges at 15.5% 8,052

Box 51 Additional tax at 1.2% 637

Box 53 Total CGT etc 18,560

Box 61 Reduced CGT etc charge for 2 sellers 17,923

Your French CGT and Social charges would be 17,923 Euros. The UK Sterling equivalent would be deductible from your UK CGT liability. You won't get a deduction for any improvements costs you have no receipts and invoices for but you get the 15% allowance regardless once you have owned the property for 5 years. Take a look here for information on longer ownership discounts.

UK CGT

The UK gain will be calculated by taking the sale proceeds and deducting from them the sum of the purchase price, stamp duty, legal fees, other purchase fees, selling agent fees, legal fees etc.

There are two rates of CGT, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year you sell the property. If you sell it in the current tax year, 2014/15, one of the following scenarios will apply:

1 If your income in 2014/15 including the taxable gain is £41,865 or less, then all the taxable gain will be charged to CGT at 18%.

2 f your income in 2014/15 excluding the taxable gain is more than £41,865, then all the taxable gain will be charged to CGT at 28%.

3 If your income in 2014/15 excluding the taxable gain is £41,865 or less but more than £41,865 when you add the taxable gain, then part of the taxable gain will be charged to CGT at 18% and part at 28%.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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