THE KNOWLEDGE


value at the date of death of the previous owner. For example, Brian, a British


resident, inherits an apartment in Paris from his father, who had bought the apartment for £200,000. At the time of Brian’s father’s death in June last year, the property was worth £300,000. The property is still worth £300,000. If Brian sells the property at


this price, there will be no CGT to pay – this is because the CGT is calculated on the value of the property in June last year, not the value when Brian’s father purchased it.


CHANGES IN 2023 Individuals in the UK currently have an annual exempt allowance (AEA) of £12,300 per year. This means that an individual can realise gains of £12,300 before they have to start paying CGT on them. From 6 April 2023, this


amount is set to be reduced to £6,000 per year, with a further reduction to £3,000 per year being introduced from 6 April 2024. For example, James sells


his French holiday home in Brittany. There is a gain of £10,000. Currently he doesn’t have to pay any UK CGT because the gain he has made is less than his AEA of £12,300 (James has made no other gains in this tax year). If the sale of the holiday


was in France for five years, before she moved back to the UK. After five years of living in the UK, Emma decides to sell the French property. There is a gain of £50,000. As the property was her home for 50% of the time that she owned it, Emma can claim PPR over 50% of the gain. A quirk of the law is that Emma can also claim PPR for the final nine months that she owned the property – even if she was not living there during that time.


LONG-TERM OWNERSHIP RELIEF In France, another important relief is that related to long- term ownership. The amount of CGT payable is tapered down


between six years and 22 years of ownership, so that by the 23rd year of ownership, CGT will not be payable. There is no equivalent long-


term ownership relief available against UK CGT. For example, Miriam, a UK


resident, owns an apartment in the French Alps, which she


purchased 40 years ago. When Miriam sells the property, she makes a gain of £250,000. As she has owned the property for such a long time, there is no French CGT to pay. However, Miriam still has to pay UK CGT on the gain.


SOCIAL CHARGES In France, if your property is sold for a gain, social charges


are assessed on the gain, in addition to CGT. This contrasts with taxation in the UK, where CGT is the only tax assessed on a gain – national insurance payments are not charged on capital gains.


DEATH UPLIFT Both in the UK and in France, there is a ‘death uplift’ for CGT purposes. This means that when a


person inherits a property, they will acquire it with the


home doesn’t happen until May 2023, it will fall into the next UK tax year (2023/2024). James will therefore have to pay UK CGT, because his new reduced AEA won’t cover the whole of the gain, however, it will help to reduce the taxable gain to just £4,000 (£10,000 gain less £6,000). If he sold a year later with the same profit, his taxable gain would be £7,000. ■


Charlotte Macdonald is a Senior Associate Solicitor in the international and cross-border team at the English law firm Stone King LLP stoneking.co.uknmk,


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FRENCH PROPERTY NEWS: March/April 202385


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