Taxes, SS, etc

[Hairy]

Hi,

Apologies as I know this subject has been doen to death. However, in the area I have been trying to find some information, I haven't found anything.

Firstly, thanks for any advice. From asking Accountants, and others, I have been offered great advice, but for the princely sum of £2400 + VAT. As we are investigating currently, and don't know if we'll make the jump, it's a lot of money to spend, then not to use the advice. So, here goes.

I am an IT Contractor with a UK Ltd company. My contracts will only be, initially, in the UK. My wife and I intend to have an adventure with our young family, living in France for their education. We are looking to buy in the Poitou Charentes area and I'll fly in and out of La Rochelle weekly.

That aside, I have seen conflicting advice as to how to manage our tax affairs. I earn a fairly large sum and managing it through a Ltd company can see us retain around 80% of our company earnings. As I see it, if we moved lock stock to France, and I started contracting through an umbrella there, I'd be looking at rather a lot less than 80%. Now, as I am earning money solely in the UK, and my family would not be working in France, I have seen advice seeing us able to pay NI in the UK, but tax in France. This works well for us, as having three kids, and only one income, we'd pay very little income tax, and can obviously pay less NI by paying it in the UK.

However, if we did move lock stock, we'd pay around 52% of our income in social charges and tax.

What is our legal position on this? I udnerstand, fully, that we'd be considered tax resident in France, as that would be the familial home. So whatever happens, I have to pay French tax. It's on the NI side I can't find definitive advice.

Any ideas?

Second question would be on the wifes side. We have a young baby, and once she's in school, we'd look at having a small gites operation, with 3 to 4 gites. I am guessing, that we could set my wife up as an entrepreneur, as we'd not expect the earnings to go much above €32k. Before this happens, what would my wifes position, and my kids, as to social security status? Given I will be paying NI in England and they'd not, initially be paying any?

Lastly, would there be any long term benefits in us simply going native and paying native taxes, social payments? Would my pension be higher in France than in the UK (State pensions)? I am 47.

again, thanks for any assistance and apologies for the length of the questions, but we're keen to move, and just want to cross these issues off, before we hire an accountant knowledgeable to UK and French tax/business laws

[Bevdeforges]

Technically, if you are resident in France, you should be subject to French income taxes and social insurance payments. Determining your residency can be tricky, but it actually has little or nothing to do with where you are physically working.

Someone else will have to advise you on the UK side of things, but if you were to set yourself up as a contractor here in France, you'd pay into the French social insurances and your entire family would be covered by the health care system here. (Remember that France has a reimbursement system - you pay up front and then are reimbursed, though at less than 100%. You can get a mutuelle or "top up" insurance to take care of the unreimbursed part.)

Assuming from what you say that you wouldn't be in the auto-entrepreneur category, running a "real business" would mean that your social insurances run about 38% of your net income from the business plus whatever sort of private pension fund you may want to set up for yourself.

Figuring your income taxes is tricky because of the way the French tax system works - but it rarely turns out to be as much as you would expect because of the "parts" and various deductions and allowances built into the system.

As far as what sort of pension you'd be looking at - that's anyone's guess nowadays. They've just raised the minimum and "normal" pension age, but they seem to be doing that everywhere now, and there is no real telling what other changes they may come up with in the next 15 to 20 years.
Cheers,
Bev

[Hairy]

The main problem, I can see, is that for income tax purposes, worldwide income is liable to French taxation, with France being my residence. For me, however, the NI side is different, as from advice I have found so far, NI is work place based i.e. if you work fully in one country, then your liability for insurance, is based in that country; as long as I don't physically work, or do any administrative work on behalf of the UK company whilst on French soil and that the UK company is registered in the UK, I cannot be held liable for French cotisations on those earnings. What I believe, and I hope is true of course, is that I pay french income tax, and UK NI. As I have 3 kids, and a non earning wife, I get 4 parts for tax, so if I am, for example, earning 100k, I have 8k removed for allowances, which leave 92k / my 4 parts; I would only be taxed on 23k. Judging by French tax schedules I have read, my income tax would only be around 4k.

It's the NI I am concerned about. We can even do this more intelligently, by paying dividends, as my wife is a partner, she would be able to claim her dividends on the company earnings. I am really hoping this is how it is, as then we stay, pretty much, on the same kind of earnings we currently do, and that would be ideal.

Thanks for the post btw.

[Bevdeforges]

Just be careful with dividends. They are subject to a different sort of taxation in France than regular income - and it gets complicated. If you're in a position to pay yourselves dividends, then you have to calculate the taxes that will be levied against the company that is paying those dividends.

Where you are subject to social insurances is another tricky question. In France, you're taxed as a "household" and there are parts of the income you declare that are subject to cotisations if you haven't paid those at the source. (Don't forget, too, that most cotisations are deducted from your income before determining "taxable income" in France. Not sure if you can deduct NI paid to another country's system.)
Cheers,
Bev

[Hairy]

Originally Posted by Bevdeforges

Just be careful with dividends. They are subject to a different sort of taxation in France than regular income - and it gets complicated. If you're in a position to pay yourselves dividends, then you have to calculate the taxes that will be levied against the company that is paying those dividends.

Where you are subject to social insurances is another tricky question. In France, you're taxed as a "household" and there are parts of the income you declare that are subject to cotisations if you haven't paid those at the source. (Don't forget, too, that most cotisations are deducted from your income before determining "taxable income" in France. Not sure if you can deduct NI paid to another country's system.)
Cheers,
Bev

Thanks Bev, I think the only way around this is to contact an anglo/French tax consultant, take the £2400 on the chin and do it that way. Interestingly, I have found a way to pass money tax free from the company to a 'trust' in France. Not too sure this is 100% legit mind...

[Tanyag34]

Hello,
Bev's responses have clearly been excellent. For the gaps, maybe you could try Googling The Naked Accountant.
Tanya

[Hairy]

Originally Posted by Tanyag34

Hello,
Bev's responses have clearly been excellent. For the gaps, maybe you could try Googling The Naked Accountant.
Tanya

Thanks! Indeed, Bev has been excellent.

[Tanyag34]

Good luck and let me know how you get on with that.