A tax present from President Sarkozy
The Daily Telegraph, Harriet Meyer, 8 September 2007
Rule changes will benefit thousands of Britons who live in France - but it's not all good news, writes Harriet Meyer
TAX does not end at Dover, despite what many expatriates may wish, but there is good news for hundreds of thousands of Britons who have emigrated to France or own homes there.
They will benefit from changes to its inheritance tax (IHT) system, under reforms being introduced by President Nicolas Sarkozy. These will treble the IHT-free threshold for bequests from parent to child, and introduce a husband-and-wife exemption for the first time in France.
However, there is bad news for those who retired there before state pension age and may now be denied access to free healthcare.
Marjorie Mansfield, associate director at independent financial adviser Siddalls, which specialises in advising people moving overseas, said: "President Sarkozy is trying to lessen the burden of this tax for the average French family, which has more children than the average British family.
"The knock-on effect, however, will also benefit many British homeowners in France, making the IHT system more attractive there than in the United Kingdom."
Any property in France is taxed there under its rules, even if the owner lives and dies overseas. So if you own a property in France, these changes are welcome, whether you are resident there or not.
Unlike in the UK, French assets left to a husband or wife have been liable to IHT until now because there was no exemption for spouses. The changes mean that IHT will not apply to French assets' left to a husband or wife.
Also, the IHT-free allowance for each child who inherits has been increased from €50,000 (£33,500) to €150,000. However, French succession laws, introduced in the 18th and 19th centuries to keep property in the family throughout generations, remain unchanged. Children have more claim to your estate than your spouse - who has only had entitlement to inherit for the past five years.
”But the president's reforms are not all good news. Thousands of Britons who retired before 65 and emigrated to France have received letters telling them they will lose access to its traditionally efficient and generous national health system under a change of rules due to take effect on September 30.
As many as 100,000 Britons who have lived in France for more than two years will be affected. It is after two years that those who have lived in France must become resident and lose the right to NHS care. Yet the appeal of better healthcare systems abroad is one of the many reasons cited by the record numbers of Britons fleeing the UK in search of a better quality of life overseas. An unprecedented 196,000 Britons emigrated last year, according to the Office for National Statistics (ONS), the highest figure since 1991, with Australia, Spain. America, New Zealand and France the most popular destinations.
A study by the Institute for Public Policy Research (IPPR) think-tank earlier this year said there are 1.3m British emigrants in Australia, 760,000 in Spain, 678,000 in the US, 215,000 in New Zealand and 200,000 in France.
Along with the healthcare and the IHT system, there are numerous other financial and practical matters to consider before moving.
CURRENCIES
The good news is that sterling is performing strongly against world currencies, said Mark Bodega of currency exchange specialists HiFX (www.hifx.co.uk ), so you should be able to get "more bang for your buck".
"The Australian and kiwi dollar are particularly weak at the moment as the problems in the US sub-prime market have had a knock-on effect on the commodity currencies," he said.
On average, a UK family emigrates abroad with assets of £250,000, from the sale of their house and car and some savings, Mr. Bodega added.
However, transferring these assets to a new country could potentially cause a loss of thousands of pounds if subjected to unfavourable exchange rates.
It can pay to use a specialist like HiFX which will fix the rate for you for up to 12 months to protect against currency fluctuations.
OFFSHORE BANKING
Although it may seem sensible to choose an offshore bank as part of the emigration process, this may not always be desirable.
Paul Bradshaw of independent financial advisers Siddalls, which specialises in expat affairs, said: "Offshore banking has few benefits, as a general rule, and products tend to be quite expensive.
"It is usually more efficient from a tax and management perspective to hold savings in local accounts, with some left in the UK if you plan to make frequent visits home." However, some people prefer to use offshore banking as it can mean the difference between being able to call on skilled staff who understand the needs of expats, instead of having to rely on local services.
PROPERTY
When you are buying a properly overseas, do not assume the law is the same as in the UK. warns Mr. Bradshaw Also bear in mind that moving to another country is a huge upheaval, and sometimes things don't work out.
Those who have bought a property abroad and then sell it may find the UK market has moved ahead at a quicker rate. They may have to buy a smaller property than the one they sold to emigrate.
Mr. Bodega said: "A lot of our clients keep some money back - this way they are not priced nut out the market."