Is this a viable plan?

sugarfree

Morning all.

I've been lurking on these boards for a while and have finally decided to take the plunge.

Here's my situation. I've been living in France for a few years and hope to stay here until I retire (in about 20 years' time), at which point we will almost certainly return to the UK.

The organisation I work for offers a good final salary pension scheme but I would also like to use the next 20 years to build up a lump sum. Here in France, there is a tax-free wrapper called a PEA (not unlike an ISA) that I have started to contributing to in a small way. I hope to increase the contributions from the end of this year, when our mortgage should be paid off.
My husband, though, is not comfortable contributing to a French scheme (language issues plus some general Franco-phobia!) and would much rather invest in a UK scheme. I've checked with Revenue & Customs, and it seems that although as non-residents we cannot pay into an ISA, personal pension or stakeholder pension, we still have our personal tax allowances, including the possibility of earning up to £8,500 in investment income.

What I propose, then, is to continue contributing to my French PEA and choose a few investment funds that my husband could pay into every month, back in the UK. We would then cash in his investments over a number of tax years, to supplement our pension. Can anybody see anything wrong with this plan?

Any advice greatly appreciated.

sugarfree

Actually, I have just realised that as a non UK resident, I should not be liable for capital gains tax on any assets I dispose of in the tax year or tax years BEFORE returning to the UK. Can anybody confirm that? If that is the case, presumably I could just go ahead and invest in a fund or funds for the next 20 years, then cash the whole thing in before returning to the UK. Assuming, of course, the tax rules remain unchanged.

cheerfulcat

sugarfree, you would still be liable for French tax, surely?

sugarfree

The scheme I intend to invest in back in the UK will probably be a Virgin Direct tracker fund. I don't see how I would be liable for French tax on that.

I spoke to Her Majesty's Revenue & Customs yesterday and they weren't very clear. The girl I spoke to said she didn't know what a "tracker fund" was!!!
My question was, would I be liable for Capital Gains Tax in the UK if I sold all my holdings in the fund BEFORE returning to the UK? They didn't know the answer!

cheerfulcat

AFAIK, just like most other countries, France taxes residents on world-wide income and gains. I don't see how you won't be liable.

There's a bit on the HMRC website about expatriates and tax. You might be interested in the ex-pats board on TMF, as well.

I would say your best course of action is to consult a professional tax advisor.

EdInvestor

sugarfree wrote:

My question was, would I be liable for Capital Gains Tax in the UK if I sold all my holdings in the fund BEFORE returning to the UK? They didn't know the answer!

Expats who have been living abroad for 5 years or more aren't liable for CGT on investment earnings in the UK at all and this includes from property.Sell before you return to crystallise the gains:then start putting the investment into an ISA.

The 8,500 annual CGT allowance applies to people onshore, and will start applying to any investments not in pensions or ISAs after you return.Note that dividends are tax free for basic rate taxpayers even if not in an ISA .

The question of whether you would be liable for French tax on the gains before that is a separate issue.

dunstonh

I spoke to Her Majesty's Revenue & Customs yesterday and they weren't very clear. The girl I spoke to said she didn't know what a "tracker fund" was!!!

Why should she be aware? Trackers are a minority fund and currently out of fashion. There is no reason for anyone at HMRC to know what a tracker is unless they have one themselves. Had you given the proper name "unit trust" or "Open Ended Investment Company", they may have understood more as a tracker could be either of those, an investment trust, a life fund or a pension.

sugarfree

OK, thanks for all the advice. This seems horribly complicated. If there's any chance at all that the French authorities might get their mits on any capital gains on my investment back in the UK, frankly, I'd rather not bother. I think I'll just put some money away each month in a French tax-efficient savings scheme (the Plan d'Epargne Actions) and spend the rest on patisserie. As I said, I am in a final salary pension scheme so it's not like we're going to be destitute. If it comes to the worse, I can also join a religious order when I hit 65.