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bigduckontax, Accountant
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Resident with a property and moving to live/work in France

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Hello,
I am UK resident with a property and moving to live/work in France next month. My UK house will be rented.
I would like to minimise my tax bills, which are UK income from employment and rent and CGT disposal this year (due to a company acquisition). From next year, I will be in the French tax system and my UK income will only be from rent and close to the personal allowance (below £13K).
I have been looking at whether setting up a limited liability partnership (LLP) in UK would be advantageous for tax. I believe there has to be at least two business partners ? A friend of mine is landlord of a couple of properties and does housing redevelopment as his main source of income.
If I transfer my house ownership to the LLP which is tax transparent, is there any difference in the income tax I would pay (I understand the LLP does not pay corporation tax but the partners pay tax on income they receive from the LLP) ?
Is there any difference in business expenses which can be claimed free of tax ?
Can the income received by the LLP be invested rather than pair directly to partners ? This would be an advantage for me during this tax year by deferring income to next year where my UK income and CGT are lower.
Thanks
Submitted: 6 months ago.
Category: Tax
Expert:  bigduckontax replied 6 months ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Expert:  bigduckontax replied 6 months ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Firstly, I cannot assist you with French Taxation. French Taxation is so complex and so constantly changing that the employment of a local, trusted professional is essential. Secondly, when you move to France, make sure you complete a Form P85 and send it to HMRC. You will then be classified as non resident for the tax year following your date of departure and furthermore the leaving tax year will be split into two portions, one resident and the other non resident.

The UK personal allowance is currently K, so with a K UK income that will be some UK tax payable annually.

A LLP does indeed have to comprise two or more persons. LLP partners are taxed on the income made individually by the partnership, but not connected with any drawings. If you made say K in the LLP, but only drew 5K your tax liability would be based on the 10K, not your drawings. The LLP can do what it likes with its profits, but your share would still remain liable to UK Income Tax (IT). Frankly using a LLP for this purpose seems to me to be a hammer to crack a nut and would also require the probity of a third party. Personally, I wouldn't touch it with a barge pole. Note a typo, should read 'If you made 10K in the LLP etc'

I do hope that you have found my reply of some assistance.

bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Customer: replied 6 months ago.
Hello BigDuck,
Thanks.
I had heard about the foreign landlord status. I believe it will only apply from the next tax year starting 2017 and this year my rental income is entirely taxed in the UK. I am treated a UK tax resident as I have owned and occupied a property in the UK, although I will have been in UK for less than 6 months this year. When I checked the P85 form notes, it said the form should not be completed if I am filing a self-assessment tax return. I think the advantage of foreign landlord status is to avoid double taxaxtion in France as I should report the UK rental income on my French tax form too (but it should be treated as tax paid income).
I had over-estimated my employment and rental income this year (counting 12 months of rent instead of 6), so the interest of saving tax is less and I agree that this would not be sufficient motivation for forming an LLP.
It is interesting what you say about LLP income being treated and taxed as my own income - I had thought that I would only be taxed on LLP profit, so if the income were re-invested into another asset, or if business expenses are deducted, then I would not be taxed on those deductions ?
Regards,
Jim
Expert:  bigduckontax replied 6 months ago.

It is normal for UK rentals to be taxed in country or origin. Under the P85 procedure once registered as non resident you may only spend 91 days in the UK in any one tax year. The P85 notes fail to take into account the thousands of non residents who have rented UK properties. You are correct, it is only the LLP profit which is taxable.

Thank you for your support.

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