French succession (probate) and UK tax self assessment

Section62

Asking for a friend*... a French national, living in the UK 10+ years and tax resident here. Prior to this situation they were only PAYE and never needed to complete a UK tax self assessment.

Their last surviving parent died in early 2020. The only beneficiaries were him and his brother. (Excluding assurance vie)

Under French succession law it appears the beneficiaries become the 'owners' of assets on the date of death, not the date of distribution of the estate.

The parent had various investments in shares, funds and property (real and SCPIs).  All dividends, rental payments etc were paid to the solicitor dealing with the estate who also paid all expenses, outgoings and taxes.

None of the income from the investments/property was paid directly to the beneficiaries prior to the estate being settled.

The friend has been sent a "Déclaration des revenus fonciers 2020" completed in his name, setting out income and expenses for the property-related parts of the estate.  This is for the period from the date of death to 31/12/2020.

The income is not large, but greater than the £1000 exemption referred to on the UK self-assessment SA106 notes.


The question is whether this 'income' needs to be declared in the friend's UK self assessment (using form SA106 or elsewhere) and how exactly to do this - given that this isn't income they actually received and is apparently only regarded as individual income under French succession/tax law.


To be clear, the concern isn't about hiding the income from the UK authorities, nor avoiding paying any UK tax due on it. It has already been taxed in France. They just need to find out what to do from a UK perspective.


Reading through all the paperwork, my additional concern for them is if they treat this as personal income and include this and the tax paid (by the solicitor in France) when they complete their UK self assessment for 2020/21 then they might become due for a refund of tax that (in UK eyes) they haven't actually paid themselves. To me that feels wrong.

The same thing applies to dividends etc from shares and funds, although they have been given no paperwork about this yet.


Any ideas or other good sources of information please?  Most of what I've found online relates to foreign income from assets personally owned by the individual, not things tied up in a succession process.

Thanks in advance.

(*for info, the friend's English and financial knowledge are not up to doing this without the help I'm giving)

Jeremy535897

The cost of seeking advice on this matter will far outweigh the amounts concerned. I doubt more than a handful of people would know the answer.

Before digging into this in any detail, why would the declaration of this as income cause a UK tax refund? Assuming the French tax exceeds the UK tax, all that would happen is that the UK tax would be reduced to nil.

Section62

Jeremy535897 said:

The cost of seeking advice on this matter will far outweigh the amounts concerned. I doubt more than a handful of people would know the answer.

Before digging into this in any detail, why would the declaration of this as income cause a UK tax refund? Assuming the French tax exceeds the UK tax, all that would happen is that the UK tax would be reduced to nil.

Thanks Jeremy535897, I agree regarding the cost of seeking advice.

Regarding the possibility of a UK tax refund, I wasn't sure whether that might happen, but was concerned that if the income and tax is declared incorrectly it might be seen by the HMRC's system as being too much tax paid on the amount of income and therefore trigger a refund.

Essentially due to the differences in allowances and rates between the two countries.  The income, less the UK exempt amount, is not very much. The tax paid is (from a UK perspective) a lot.

So from your comment, is it the case that no UK refund of any of the amount of tax paid in France would ever occur?  If so, that would alleviate one concern.

[Deleted User]

The long and the short of it is that you receive, a tax credit, UP TO the amount of U.K. tax on that source, and only that source, of income. 

So, if the U.K. tax is greater you will receive credit for the French tax already paid and be liable for the difference.

If it is less, you will pay no U.K. tax on this source but not be entitled to any refund of the additional French tax paid.

Jeremy535897

That's how I see it. I don't think it's worth digging into domicile, deemed domicile, double tax agreements and the rules on unremittable income when the refund issue seemed to be the only current question. I am assuming there is no other non-UK income, but if there could be substantial non-UK income and gains in the future, it might be worth exploring those. See:
https://www.gov.uk/guidance/deemed-domicile-rules
https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1

Section62

Jeremy535897 said:

I am assuming there is no other non-UK income, but if there could be substantial non-UK income and gains in the future, it might be worth exploring those. See:

Thanks for your comments purdyoaten2 and Jeremy535897.

I'm going to read into that guidance further and ask some more questions of the friend.

The issue of whether there is other non-UK income is an open one (as per my original post).  The parent also had investments in shares and funds - if these are treated in the same way as the property income then it appears dividends from these would (under French law) be treated as income of the beneficiaries.  However, the solicitor has only provided details of the property income, and hasn't been able/willing to explain why that's the case.

It is clear from the succession paperwork that a strict division exists between property and other assets, so it is plausible they are treated differently for tax purposes as well.

Again, many thanks for your help.

Jeremy535897

One explanation for the difference may be that if French tax rules look through the estate to the beneficiaries, under the UK-France double tax agreement both countries may tax French property income, but only the UK may tax French interest, and most French dividends, that are treated as belonging to a UK resident. If that is the case, there may be some tax to pay in the UK. Article 23 briefly mentions trusts and estates, but not in a helpful way. (You tempted me to dig a little more...) See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/496672/france_dtc_-_in_force.pdf