September 2014  -  LA RENTREE – TIME TO STOP PUTTING OFF THOSE TRICKY DECISIONS

As Summer visitors start to drift away and we get “our” regions back to ourselves, thoughts turn to all those jobs that we have put off during the holidays.

For those with children, late August/ early September is all about getting the list of books, pens and equipment needed for the new school year and getting to the local shops before they sell out.

Gardeners will also start to think about the Autumn jobs that need to be before winter sets in.

Why not also make this year’s “rentrée” the time when you finally put your finances in order?

Just run through the following list and see whether you have ever said any of these things. If so, it might be worth having a rethink, as taking no action could be an expensive mistake for you and/or your family.

I am still resident in the UK, so don’t need to make any financial arrangements in France

It is a common misconception that residence is a matter of choice. Whilst, of course, we can choose where to live, fiscal residence is also a matter of fact. Many people split their time between the UK and France and could quite legitimately claim that they are still UK resident. However, there are also a large number of people who spend almost all of their time in France but are still “UK resident” for tax purposes.

Each country has its own set of rules regarding residence, but if more than one country can claim you are resident there, and if there is a tax treaty in place between the countries, it is this which will determine where you are fiscally resident. Put simply, if you split your time between homes in the UK and France, where you spend more time is likely to be considered your place of residence.

Even if you are still resident in the UK and only use your property in France for holidays, this property will be subject to the French inheritance rules in the event of your death and it is therefore sensible to ensure that you understand who will inherit what when you die.

I will pay far more tax in France than Britain

France has long had a reputation for high taxation, which spends its taxes properly on its infrastructure. Whilst it is true that the cost of running a business here could be significantly higher than in other European countries, for individuals, French income tax compares favourably with its neighbours.

One area which concerns British people is the “Impôt de solidarité sur la Fortune” (ISF), or wealth tax. This is an annual tax on your capital assets, which is alien to British taxpayers. The tax is applied once assets exceed €1,300,000 and your “principal residence” benefits from a 30% discount when calculating the value of assets.

However, for anyone having taken up French residence since August 2008, you do not need to declare any “non French” assets for the five years after you become resident.

Of course, it is sensible to do your sums before making any decisions about moving to another country permanently, but to live in France on an almost permanent basis and not declare yourself resident because you are worried about the tax bills could not only be a mistake but could land you in hot water with the authorities and could mean you are paying more tax than is necessary.

The French system is too complicated and I just want an easy life

It does sometimes seem that everything in France was invented to keep the bureaucrats happy, but with proper advice and guidance, the French system need not be that daunting. In any case, ignoring a potential problem because it seems too complicated to sort out generally just makes that problem worse.

Getting seemingly complicated technicalities explained in plain English could prove to be invaluable in the long run.

I have written a will in the UK and my family knows my wishes

Living permanently in France means that your worldwide assets are subject to French inheritance rules and taxes in the event of your death. The only exception for people with assets in the UK and France is any property (real estate) in the UK, which will still be subject to the rules and taxes that side of The Channel.

If you do still have property in the UK, your UK will is still valid as far as that property is concerned. However, the rest of your assets will fall under the strict French rules, as originally decreed by Napoleon under the “Code Civil”.

Qualified professional advice will help you to ensure that you understand the French rules and make use of them to suit your circumstances because dying without making prior arrangements could leave your heirs with some very nasty surprises.

My money is all in Sterling and I don’t want to change it to Euros

We would always advise people to have at least some income and/or capital in Euros, as that is the currency you use to buy your baguette and other essentials.

However, whilst the recent weakening of the Euro has made the situation slightly better, it is understandable if people do not necessarily want to exchange Sterling for Euros currently. That does not mean that proper financial planning for life in France is not possible. Tax-efficient options still exist for those not wishing to invest in Euros, so long term decisions can be made now and currency decisions can be postponed if you wish.

What’s the point in bothering? I will eventually go back to the UK

Whilst the longer term plan may well be to return eventually to the UK, doing no planning now could mean that you pay more in taxes on your income than you need to and you could land your heirs with big headaches if you die whilst still resident in France.

It is perfectly possible to structure your affairs so that they are tax-efficient for life in France now, without having to undo all that planning if you move back to the UK in the future.