taxation on uk property

mand · Post by **mand** » Thu 13 May 2010 16:44

Does anyone know anything about what tax would have to be paid if you have a house in the UK and let it out but reside in France.

We are moving later this year and have been told by letting agents that because we are moving to France they have a duty to deduct 10% of the rental income for UK tax, However there is a form to fill in if we would prefer not to have them deduct it and do our own tax return.

If we pay tax in the UK would we then be taxed again in France on this income?
Any idea how much extra they would charge us?

If anyone has prorerty that they let and are living in France i would be grateful for any advice...

Santiago · Post by **Santiago** » Fri 14 May 2010 00:13

You can fill in a form to not pay UK tax on your UK propery but you will need to declare that income in France. In fact I think you will HAVE to do than.

Post by **Kate** » Fri 14 May 2010 07:52

We know some people who rented out their house via a letting agency for over four years but elected not to pay the tax. In the fourth year they were served a bill for over 5000 which added daily interest when they didnt pay it immediately. This was about five years ago, so things might have changed, but personally I wouldnt take the risk. The rentals might well claim tax relief on their rent, (whcih is what happened to these people) in which case you're buggad.

Marguerite & Steve · Post by **Marguerite & Steve** » Fri 14 May 2010 08:27

If I am right, as we did cover this before we came over. If you pay a mortgage on the property and any bills, this ofsets against the tax you pay, i.e you pay tax on any profit you make, I am sure that's right but worth checking out, I think you fill a form in and you get a % of it back.

Sue · Post by **Sue** » Fri 14 May 2010 08:56

We only rented ours out for the first year of being here and then sold it. We contacted tax office informing them of amount of rental and the amount of mortgage which were more or less one and the same and received a letter from Tax Office confirming no tax was payable.

mand · Post by **mand** » Mon 17 May 2010 13:05

Thanks for the replies, if we pay the tax due in the UK would we also be taxed on it again in France?

Why i ask this is because when we sold a property in france 3 years ago we paid capital gains tax to the French government but then last year we were ordered to pay £2500 to the UK tax man even though the money never came into the UK or anything.

We were told we paid 18% to the french but because we reside in the UK and capital gains is charged at 20% we had to pay the 2% difference.

mpprh · Post by **mpprh** » Mon 17 May 2010 13:29

You need to talk to a UK tax advisor, as I may be out of date.

For 10+ years I rented out my UK house whilst abroad.

If you are up to date with your UK taxation affairs, you can receive the gross rental income from the agent. If the agent has not received confirmation of this from the tax office, they will withhold tax and account for it to the taxman giving you a form (R185 ?) as certificate of tax paid.

I produced a set of accounts deducting repairs, renewals, professional fees, etc to calculate the net profit. Strangely, I was still entitled to personal allowances and these were offset against the taxable income (inc. rental profit) to calculate the tax liability. I couldn't deduct mortgage interest because I was already paying it net.

Interestingly, I was not liable for CGT on the sale despite notifying the tax office. Apparently, once you establish overseas tax residence you cease to be liable for CGT (Seems to be an EU agreement as I wasn't assessed on another property I sold in Belgium).

This was the situation up to about 7 years ago - it may well have changed.

Peter

mpprh · Post by **mpprh** » Mon 17 May 2010 13:39

mand wrote:
We were told we paid 18% to the french but because we reside in the UK and capital gains is charged at 20% we had to pay the 2% difference.

Same thing happened to me when I was based in Belgium. UK and French income was used to establish the higher rate taxes and I got a bill for the balance.

There is a concept of "world income" and that is the basis of establishing your notional total tax liability. You are then able to deduct tax paid elsewhere under double taxation agreements.

This is how the double taxation agreement works. It ensures that you pay the tax at the higher of the two rates, but you only pay it once.

For smaller amounts, my local French tax office has not tried to collect the excess.

Peter

TOM AND BARB · Post by **TOM AND BARB** » Mon 17 May 2010 15:43

Hold your horses guys and girls --- breaking news today on the BBC - MAY well affect everyones position.

I believe I am correct in saying that Cameron has announced a new 40% CGT on second homes.

I do not have full details or the cross border ramifications but it could hit hard if you have a 'second' home in either the UK or abroad.

If this is correct, where was this in their manifesto ?

They must have known they were going to do this. Its not something you just think of on the spur of the moment. The election was only a couple of weeks ago !!!!!

Perhaps someone on here with more knowledge than I on taxation could research the implications and feedback to the forum ?

Roger O · Post by **Roger O** » Mon 17 May 2010 21:53

I did hear something about the manifesto small print...
... here or there but not both...?
(Just joking)

Incredible but the Swiss (here he goes again!!!!!) give you tax allowance on any number of 2nd homes - i.e. you can have 5 mortgages and you'll get tax relief on each and every one of them. Some well off locals end up paying no tax at all..

When we bought our small place in Vallée Heureuse in 92 (letting and occupation for 7 weeks September/October) we put no deposit (100% personal loan) but bought "parts" in Credit Mutuel as guarantee (which paid dividends). The "mortgage" payment was offset by a 40% income tax reduction in CH.

When we moved to France in 94 two years later we sold the house as fast as possible - firstly because we were in Antibes so we had the climate and secondly because the golden tax rebate days were over! (The French tax authorities in Nice didn't believe me when I told them about the Swiss deal!!!)

carol sheridan · Post by **carol sheridan** » Tue 18 May 2010 08:47

I retired from the Inand Revenue eleven years ago, so I can't claim to be up-to-date on all the rules, but I know that once you become non-resident from the UK you used to cease to be liable for CGT. Only mortgage interest in claimable against rent, not repayment of the loan.
I assume you would put your UK rent on your French tax declaration and also any tax deducted at source or paid in the UK, just as I do with my UK government pensions.

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