My French-born client is resident in the UK.
She has received a letter from HMRC under the "Worldwide Disclosure Facility" indicating that she may have omitted income from her UK Tax Return. She has advised me that she receives a French State Pension and that this may be the income that HMRC are considering. I had previously been unaware of this income.
I am therefore looking into whether this French State Pension is taxable in the UK. This led me to Article 18 of the UK/France Double Tax Treaty which states:
"Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State shall be taxable only in that State"
Article 19 – para 2 states:
"Pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a local authority thereof, or, in the case of France, a statutory body, to an individual in respect of services rendered to that State, authority or statutory body shall be taxable only in that State. However, such pension shall be taxable only in the other Contracting State if the individual is a resident and a national of that State without being also a national of the first-mentioned State"
Does this suggest that if my client is no longer a national of France, that the pension will only be taxable in the UK? Whereas, if she is still a national of France, the pension will only be taxable in France?
Assuming this is the case, presumably I need to establish whether she is or is not still a French national?
I have yet to establish her domicile.
Whilst I am not sure if that is relevant, she does jointly own two properties in France with her husband (UK resident and UK national) and pays wealth tax in France in this respect.
Any thoughts would be very gratefully received. Many thanks in advance for any replies.
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Replies (10)
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Haven't looked in to the rules for uk/France but it's possible that the French pension income should be included in the foreign pages detailing income and tax already paid.
This may give rise to a tax credit meaning your client may have little or no additional tax to pay.
I am unsure of the domicile position of my client. It is something which I will endeavour to establish. The pension income is not remitted to the UK and is held in a French bank account, the monies used when my client is in France.
That aside, the replies from TaxBoss and accountantccole do seem to confirm that the French State Pension is taxable only in the UK. I assume that you would agree?
HMRC digest of double taxation agreements helpfully confirms that state pensions are relieved under the Other Income Article 23 (rather than Articles 18 or 19), and is taxable only in the country of residence.
That is really useful, many thanks. Yes I see from having read Article 23 that it does confirm that the French State Pension is taxable only in the UK.
I think in A 19 para 2 the key is "services rendered to the state"
For our French resident clients with UK pensions, the state pension is taxed in France, Government pensions (services rendered to the state, firemen, policemen, local council and some teachers) are taxed in the UK
Private pensions taxed in France
So the reverse for a UK resident with French pension - I'd say taxable in UK on the basis that it is state pension
Is the pension of someone who was employed by French public hospitals (owned by the French State) considered by HMRC as a pension for Services rendered to the French Government?
Thanks in advance.
The short answer is no. Just because a business is owned by the state doesn't make the employees of that business civil servants. An NHS hospital doctor isn't in government service. A doctor employed by the home office to treat prisoners, probably is.
Ask her about the French bank account(s) she has. In my experience MUCH more likely to be the prompt for HMRC's letter.She has received a letter from HMRC under the "Worldwide Disclosure Facility" indicating that she may have omitted income from her UK Tax Return. She has advised me that she receives a French State Pension and that this may be the income that HMRC are considering. I had previously been unaware of this income.
Ask her about the French bank account(s) she has. In my experience MUCH more likely to be the prompt for HMRC's letter.
The amount of information exchanged between tax authorities has escalated exponentially*. Folk what haven't declared under recent initiatives - and not just the bank accounts - can expect metaphoric knocks on (equally metaphoric) doors.
In short, OP, encourage her to come clean. Proper clean.
*Using that expression colloquially, not mathematically.
