Selling Property in France – Do I Need to Worry about Capital Gains Tax in the UK?

 

Charlotte Macdonald, an associate solicitor in Stone King’s international and cross border team, sets out a number of scenarios that a British owner of French property may encounter.

Over a 12-part series of articles Charlotte will cover topics such as how to buy your property as a couple (jointly or not), the different legal implications for a married couple and a civil partnership, and what happens to the property on your death, including who it will pass to and what succession tax consequences there might be.

Scenario Eight – Selling property in France – do I need to worry about Capital Gains Tax in the UK?

Helen is Welsh and has spent most of her life living in Cardiff. 10 years ago she bought a small apartment in Chamonix that she stayed in for summer walking holidays and skiing in the winter.

Helen is now approaching her late 70s and is not as active as she used to be. She has decided to sell the Chamonix apartment and use the money to buy a holiday home closer to Cardiff.

Helen bought the Chamonix apartment for £210,000. She has just accepted an offer of £280,000 and wants to know if she will need to pay any capital gains tax (‘CGT’) on the gain of £70,000 in the UK or in France.

CGT is a tax payable when you sell a property, and the sale results in a gain. It is also payable in the UK if you give a property away, and the open market value at the date you give it away is greater than the value when you acquired the property.

In the UK, an individual can make gains of up to £11,700 (tax year 2018/19) before the gains are taxed.

As Helen is resident in the UK, her worldwide gains will be assessed for CGT purposes by HMRC, including those in France. As the gain is over £11,700, Helen will need to report the gain to HMRC.

As the property is located in France, Helen will also need to pay CGT in France.

Both in France and the UK it is possible to deduct allowable expenditure against the gross profit before the CGT is calculated. The allowances in the UK and France are not exactly the same, but very broadly speaking improvements to the property and costs associated with the sale can be deducted.

In Helen’s circumstances she will need to pay CGT in both France and the UK. She will however be able to credit the CGT paid in France against the CGT due in the UK. This will help Helen to avoid double taxation of the gain.

Conclusion

If you are in a similar position to Helen and you are selling your property in France with a gain, you do need to be aware of both UK and French CGT consequences.

If you instruct expert solicitors in cross border law, such as Stone King, to act for you in your sale your solicitors will be able to advise you of your total CGT liability. Your solicitor will liaise with your notaire to ensure that the correct tax is paid in France and can calculate and submit your CGT return to HMRC on your behalf.

Previous scenarios;

Scenario 7 – Selling property in France and some important differences compared to the process in the UK

Scenario 6 – Can I leave my French home to an English Charity and will Brexit change this?

Scenario 5 – Inheritance tax in France – I’ve inherited French assets but I live in England

Scenario 4 – There is a trust in my will, can this be subject to Inheritance Tax in France?

Scenario 3 – I have property in England and France. I don’t want to leave anything to my children in my will. Can I do this?

Scenario 2 – Leaving French Assets to Step-Children

Scenario 1 – Will French Law Prevent me from Leaving all my Assets to my Spouse?

For more information please contact Charlotte Macdonald, Dan Harris or Raquel Ugalde at Stone King LLP either by calling +44(0)1225 337599, or by emailing: [email protected]