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French Legal Issues
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 09/05/2008, 9:47
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Scooby
Joined on 25/09/2007
Peak District
Posts 235
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Re: Definition of 'domiciled'
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If it has not been made clear already, if you are considered to be domiciled in the UK then all your assets (whereever they are situated in the world) will be subject to UK inheritance tax.
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09/05/2008, 10:51
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Will
 
Joined on 22/09/2004
Sussex & 50 (Mortainais)
Posts 4,641
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Re: Definition of 'domiciled'
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Where this matter becomes relevant is if you are tax resident in France, but still have property and/or significant investments or financial interests in Britain. In this case, if you give up your UK domiciled status, then all your assets, worldwide, will be subject to French inheritance tax, which can be a bad move in financial terms (though might be advantageous for some).
If you retain UK domicile (particularly if you have dual residence status), and, most important, arrange things properly and legally, then it is possible to shelter your UK assets from the French tax. Though the French tax people may not always agree ![Wink [;-)]](/cs/images/emotions/wink.gif) as long as this is done within the provisions of the double taxation agreement you, or rather your heirs, will be OK. Of course, your French property will still be subject to French taxation and your UK assets will come under UK IHT. But this is often better than having the whole of your estate taxed in France.
In short, I agree with Scooby (and Pickles), with the proviso that it is rather difficult - if not impossible - to stop the French tax people applying French inheritance tax to houses and land situated in France. Which I am sure they said, but somebody who does not understand the double taxation arrangements might not realise. There are possible alternatives, including ownership of property through companies or trusts, but these can have negative tax implications in other respects, and trusts are not, as such, recognised in France. And of course, if you are UK domiciled, then you pay UK inheritance tax anyway - though under the double taxation agreement you should not be taxed twice. So there is no 'one size fits all' answer; it depends on so many variables, including the value of your estate, how many reserved heirs, etc etc.
Will
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http://www.vienormande.com
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09/05/2008, 15:03
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martynandsue
Joined on 21/04/2008
Hampshire and soon near Lalinde
Posts 9
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Re: Definition of 'domiciled'
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As the originator of this thread, regretfully I am still confused. Having read all the comments, which have been very useful and thought provoking, I then read the HMRC documents (thanks Will for pointing me in that direction). Although I appreciate HMRC rules apply only to UK situation, they state that ‘You are domiciled in the country where you have your permanent home. Domicile is different from nationality or residence.’ So with a permanent home in France, domicile is in France, n’est ce pas? The French would agree with that surely, and I would be subject to French IHT laws. But HMRC go on to say that ‘You can only have one domicile at any given time’, yet my domicile of origin is definitely in the UK, (born there, father etc.) and I will have dependants remaining in the UK, bank account etc.
Clear as mud!
But after all the legal discussion – with a fairly simple situation (married couple retiring permanently to France, sort succession so that assets go to other spouse, then equally to dependants) – financially in the long run is it going to be better to come under UK IHT rules or French? (Or is that too simplistic a question?)
Martyn
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09/05/2008, 16:34
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Will
Joined on 22/09/2004
Sussex & 50 (Mortainais)
Posts 4,641
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Re: Definition of 'domiciled'
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If your permanent home is in France and you have few, if any of the ties such as those mentioned by Scooby you can declare yourself to be French domiciled, in which case HMRC will not be interested. However, if the authorities in either country feel that you are attempting to evade taxation (rather than just avoid it, which is legal if done properly) they may investigate your affairs and deem the situation to be otherwise.
The problem is that French IHT is potentially very high, particularly for inheritors other than very close relatives, and the 'thresholds' are rather lower than in UK, and, indeed, in some cases don't exist at all. Whether your heirs would be better off or not if you were completely French domiciled depends on a number of factors, like the size of the estate, how much is 'fixed' property in either country, how many heirs, their relationship to you, etc etc. That's why I suggested your advisor, who obviously knows far more about your affairs and is better qualified than me, may be correct in so far as suggesting that you should think carefully about giving up UK domicile. I have to say that I have known Siddals and similar companies to offer poor - even totally incorrect - advice, so I wouldn't necessarily take what they say as being gospel truth, particularly if they don't have the complete picture.
Also the current HMRC IR20 booklet is an interim version, pending changes (although they shouldn't affect your situation) so there may well be inconsistencies. After all, as it says, there is no statutory UK legal definition of domicile, it merely follows what has been decided in various pieces of case law, so it is potentially an ever-changing concept.
This is the sort of question that can never be completely answered on a forum like this, but the discussion is of value if it suggests items you need to find out more about, or gives you questions to ask the real experts.
Will
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http://www.vienormande.com
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10/05/2008, 7:36
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NormanH
Joined on 10/04/2008
Posts 171
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Re: Definition of 'domiciled'
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Nothing to add technically to the sensible and informative posts of Will et al, but I have an observation.
A number of British people have been worried about the UK taxman for so long that they fail to be terrified of the French one.
In other words if you live in France forget British definitions.
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France Forum » Legal and Finan... » French Legal Is... » Re: Definition of 'domiciled'
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