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UK owners of French property could be due a tax rebate…

The EU Directive reduced social charge rate

Before Brexit, taxpayers living in the UK who owned property in France were generally liable to the French social charge at a reduced rate of 7.5%. This applied to rental income received from their French real estate and on capital gains from any property sold.  This arose under the EU Directive on the coordination of social security systems which generally applies to those who are tax resident outside of France, however this may also be applicable to French residents affiliated to the NHS.

How did Brexit affect this tax position in the UK?

Following Brexit, the Directive no longer applied to UK residents with effect from 1 January 2021 and so they were faced with the standard rate of French social charge of 17.2%.  Unsurprisingly, this triggered a strong backlash in the UK with many people owning a French property facing what amounted to a significant tax hike.

On 30 December 2020, the EU and the UK announced the terms of the post-Brexit Trade and Cooperation Agreement which included new rules on social security coordination between the EU and UK.   

French tax authorities revert to lower rate

In an unforeseen U-turn, French tax authorities decided that the rules in the Trade and Cooperation Agreement essentially mirrored the rules in the EU Directive, and therefore reverted to the reduced social charge rate of 7.5% for UK taxpayers. The French tax authorities published their administrative guidance on this last month to confirm these welcome changes,

UK taxpayers who received rental income from a French property (or sold one in 2021) are now able to claim a tax refund for the additional social charges unduly paid. Taxpayers who believe they are eligible to make a claim have until 31 December 2023 (or until 31 December 2024 in respect of rental income), to lodge a claim with the French tax authorities.

François Mounielou, Tax Advisor at Druces LLP had this to say about the changes:

“The decision to revert to the reduced rate is welcome news, with many now considering how to recoup their overpaid taxes.  The decision is also good news for anyone considering buying a French holiday home as they will now benefit from the reduced rate of the French social charge if they rent out their property or sell it at a later date.”

Further information

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