If leaving France to return to UK, take advice to maintain and secure tax advantages. Also review your estate planning, pensions and investments.
If it’s “good-bye” and not “au revoir”, you certainly need a plan.
We normally encourage individuals to relocate to France, extolling the virtues of living here. However we also know there are circumstances where repatriating or relocating to another country is desirable or necessary. If you want to make the best of your move you will undoubtedly benefit from advance planning.
In many ways, repatriating to the UK is a simple process. However, from a tax and financial planning perspective there are many opportunities to make the best of your time in France and return to the UK with tax and other financial advantages that without forward planning will be lost.
It is important to carefully review all the tax and wealth management considerations before you leave France – even before you decide on the date of departure. You can secure long-term tax benefits in the UK due to your time as an expatriate and also retain the tax advantages you may have secured by previous tax planning while resident in France.
You will become non-resident in France the day after you leave under the local rules. You have to inform your local tax office of your date of departure and new address, and then file a part-year resident tax return the following year.
In the UK, you may qualify for split year treatment under the Statutory Residence Test but you need to understand all the complexities of the test to determine when you become UK resident for tax purposes. It may start earlier than you realise. If you buy or rent a property to use as a base when visiting the UK while planning your move, this could unwittingly affect your UK residence status.
In order to reduce tax liabilities on both sides of the Channel, you will need to take action at the appropriate time to, for example, determine the optimum date for your return, consider your domicile situation, crystallise investment gains, realign investments, consider appropriate trust structures, consider gifts, avoid exit tax etc.
Where possible it is better to plan your return date around your tax planning rather than the other way round. It is usually beneficial to complete any necessary arrangements in the UK tax year before your return.
Capital gains tax is an important consideration when moving from one country to another. You will need to decide if it is more beneficial to sell French assets while still in France, or should you wait until you are UK tax resident?
There is no simple answer as to whether tax rates are cheaper in the UK or France; the two regimes are very different.
In the UK, individuals pay capital gains tax at 18% and 28% on real estate and 10% or 20% on shares, depending on their total taxable income, with an £11,300 annual allowance (for the 2017/18 tax year).
In France, capital gains on shares are taxed at the income tax scale rates. The capital gains tax rates on property currently range from 19% to 25%, plus 15% social charges. Reductions are available based on how long you have owned the property, so that it is tax free after 22 years and escapes social charges after 30. The main home is exempt in France provided it is your habitual and actual residence at the time of sale. In the UK it depends on whether it qualifies for Principal Private Residence relief or not.
France imposes an exit tax on stocks, shares and UCITS funds, even if you do not sell them before you go. The rules are detailed, but in summary residents who have lived here for over six of the last 10 years are subject to an exit tax of up to 45% and social charges of 15.5% if they leave. With expert advice you could avoid this liability.
You need to consider how your investments will be taxed as a UK resident. If your tax planning was set up to take advantage of the French regime, you now need to consider what is tax efficient in the UK and adjust, as necessary. If you carry out appropriate planning while still non-UK resident, you may be able to benefit from tax advantages when you return which are not ordinarily available to UK residents.
Your estate planning will need a thorough review, to consider inheritance taxes, succession law, probate etc. Ensure your assets pass to the right beneficiaries at the right time, with the minimum of administration and taxation.
Returning UK nationals are normally liable to UK inheritance tax even if they had acquired a new domicile of choice. If you have any structures set up on the basis that you had a domicile of choice in France, you need to seek specialist advice.
If you had transferred your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS) you will need specialised advice on the best way forward.
If you made pension decisions based on French taxation, you need to establish what you can and should do once you are liable to UK rather than French taxation.
Monaco residents benefit from the many tax advantages the Principality has to offer. Those moving from Monaco to UK should consider all of the implications of a return to the UK, or unexpected or unnecessary UK taxation may be payable following your return. An unplanned departure could easily repatriate capital and gains to HM Revenue & Customs at significant cost. However there are specific opportunities for Monaco residents to consider prior to departure. This is not a DIY advisory area – you need a precise strategic review to get the best out of your return.
Whether you are moving from Monaco or France to the UK, it is important to seek guidance from an adviser with in-depth knowledge of both UK and local tax regimes and the interaction between them. So, if it really is not “au revoir”, take this opportunity to secure all the possible advantages your onward move might provide.
Any questions? Ask our advisers for help.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.