CGT Reciprocal tax agreement with France

[Kellis]

We are about to sell our French property and will be subject to CGT in France. Under the reciprocal tax agreement can we reclaim this in the UK as we will not have used any of our CGT annual allowance in the UK?

[Tax Accountant]

We are about to sell our French property and will be subject to CGT in France. Under the reciprocal tax agreement can we reclaim this in the UK as we will not have used any of our CGT annual allowance in the UK?

This is not my area of expertise, but my understanding is as follows.

If you are resident and ordinarily resident of the UK, which appears to be the case, you will also be chargeable to UK CGT on the gains on French property. However, you will be able to reduce your UK CGT liability by the amount of the French tax which you have paid on the property.

If the UK liability is higher than the French liability, you will need to pay the difference to the UK tax authorities. If the French liability is higher than the UK liability, you will not be entitled to any refund from the UK authorities.

Put simply, the UK authorities would not refund any of the tax paid by you to the French tax authorities. At best, the UK authorities will not collect tax again on the same gains on which you have already been taxed by another country.

Ramnik.

[Tristan]

Kellis

I seem to recall that France deduct tax from the proceeds, but then pay some of it back to the seller at a later date, sort of like a retention to cover potential liabilities (I'm not entirely sure of the mechanics).

If you're in this position, you'll have to be careful of the amount of French tax you claim as a deduction against your UK liabilities. Professional advice with the benefit of reviewing all the documentation is advisable.

Tristan

[Tax Accountant]

Kellis

I seem to recall that France deduct tax from the proceeds, but then pay some of it back to the seller at a later date, sort of like a retention to cover potential liabilities (I'm not entirely sure of the mechanics).

If you're in this position, you'll have to be careful of the amount of French tax you claim as a deduction against your UK liabilities. Professional advice with the benefit of reviewing all the documentation is advisable.

Tristan

But you will still not be able to claim refund in the UK of any of the tax suffered in France, even if you will not have used any of your CGT annual allowance in the UK?

Ramnik