strategy to get away

EdInvestor

Here's the double tax treaty anyway so the OP can check the status of UK dividend income.

http://www.hmrc.gov.uk/businesses/fagform_france.shtml

IMHO currency risk is just one of various risks one needs to bear in mind when investing and living overseas.The OP should steer well clear of offshore UK "advisors" flogging products from well known UK insurance companies. These people are unregulated and the products have some of the highest charges around.There are many scammers.

shiredeon

I am in the process of enquiring about the tax situation in france so that may decide a few factors, whilst i realise there are investment oportunities in france i feel that it would be safer for me to invest in uk especially as when i get old and senile i may stand less chance of being ripped off, plus i will probably dismantle it and give it to the kids over a period of time.

I have an account with a money purchase company so if i tranfer the funds anually i should get a good rate,

I will also take a look at my epp and tell you which funds it is invested in, i know most were in us equities for a long time but i think i switched when they started to falter,

My imediate concern is what i do with my epp, leave or take the cash, i know it will acrue if left but you have to take it sometime and i would sooner have an increased income now whilst i still want to do things rather than have a pot of money when i don't need it, mind you i also don't want to do something completely stupid which is why i bow to your greater judgement.
thanks.

Cook_County

In my opinion:
1. You remain domiciled within the UK for UK tax purposes so remain subject to UK IHT on worldwide assets.
2. You will become domiciled in France using the French tax law definition of the word "domicile" (Which is entirely different from the UK tax definition of the same word). Consequently you will become subject to French income tax on worldwide income, wealth tax on worldwide assets and gift and inheritance tax on worldwide assets (subject of course to forced heirship), all subject to relevant treaty exemptions.
3. You do not mention that you plan to pay any French social security contributions. Consequently you may find that you ineligible to claim French retirement pension or - more immediately - medical expense reimbursement. How will you pay for your own medical expenses?
4. I do not know the answer, but given that France does not recognise trusts I would expect them also to ignore all UK pension wrappers and tax the underlying growth each year. None of the previous contributors appeared certain either, but aside from deciding on a wrapper you also urgently need professional advice on the tax position.

shiredeon

ed, one thing i see that from other posts you say the hyp is ok providing you are a basic rate tax payer, i am not at the moment but obviously will be when i retire, does that mean i can only create the hyp after retirement?.

EdInvestor

Shiredeon

You would pay 25% tax on the divis of those HYP shares not in your ISA*, so I wouldn't view it as a problem.It's a Long Term Buy and Hold strategy so capital gains tax is not normally triggered and in any case the allowance is high,9k a year.

Given you pay no charges for holding the investment, the tax on the divis won't make much of a dent on your returns. eg if you had 1000 invested and made 15% return of which 5% was the divi, 13 quid out of your 150 quid profit would go in tax.It's not a lot - about 8.6%.

People will tend to suggest you put investments into an investment bond wrapper to avoid this tax on divis.But you will pay 20% tax on the returns inside the bond, more than double, plus very high charges for the wrapper.

Many of these tax avoidance schemes cost more than they save.

*Always use your annual 7k maxi ISA allowance and with an HYP, put the shares paying the highest divis in first - usually it's Lloyds and United Utilities,which both pay over 6%. Use your partner's allowance as well and after 5 years you'll have 70k tax protected plus whatever gains have been made.

cheerfulcat

shiredeon, the higher rate tax on dividends is 32.5% ( link ). You can use the 10% credit against this liability. Bear in mind too that when you are declaring your dividend income you declare the gross amount, that is, the dividend you actually got + the tax credit. This can push you into the higher rate bracket if you are already close to it.

If you are resident in France for tax purposes AFAICS the French taxman will accept the 10% tax credit towards your tax liability but it looks to me as though there will be more to pay on top, depending on your tax band, though the first couple of thousand Euros worth is tax-free. BTW French income tax is based on household income rather than personal. It also looks as though you will be liable to social charges on the dividends as well, which is another 11%.

Despite what Ed says, I would suggest that the Assurance Vie is worth a look.

EdInvestor

the higher rate tax on dividends is 32.5% ( link ). You can use the 10% credit against this liability

It works out at 25%. I'd have thought the main point of the Assurance Vie is to avoid the French succession laws, if appropriate.

cheerfulcat

Nope, it can avoid a lot of taxes - there's no income tax or CGT payable on trades within the wrapper, so the growth is tax-free. Withdrawals are taxed very favourably. It can also help to avoid wealth tax ( which may well be applicable in shiredeon's case ). All in all, well worth a look IMHO.

EdInvestor

According to this thread there exists a kind of super French ISA called a PEA ( Plan d'Epargne d'Actions) into which you can put approx 100k and avoid all taxes.:)

You have to leave the money in for 8 years (not sure if you can take an income) to avoid all taxes - penalties are applied if you remove the money earlier.This looks worth investigating.