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Brexit and the long history of the British buying property in France

The British have been buying property in France for hundreds of years, writes researcher Diana Cooper-Richet in The Conversation and while Brexit might put a few off coming, it's unlikely to put an end to the age-old trend.

Brexit and the long history of the British buying property in France
Photo: Leggett Immobiliere/The Local

Since the first decades of the 19th century, many British citizens have bought properties or built houses in France. Approximately 150,000 UK citizens currently live in France, second only to Spain. With Brexit on the horizon, many are uneasy, for the draw of life in France remains strong, and its roots are deep.

Initially, those who acquired estates in France belonged to the privileged classes. They were seeking a milder climate as well as a lower cost of living. Starting in the 1800s, prominent British citizens began buying or building luxurious residences in the Channel ports of Boulogne and Calais. In Dieppe, on the Emerald Coast, the Villa Bric à Brac, was built in 1856 by the members of the Faber family. (It has recently been transformed into a luxurious hotel). Close by, another superb English villa is Solidor, owned by Williers Forbes, who in 1879 launched the first tennis club in France. In 2005 it was purchased by French billionaire François Pinault and renovated. Many distinguished guests, including French president Jacques Chirac, have been hosted there.

Enchanted by the place, the politician and staunch abolitionist built a beautiful villa, which he named Eleonore-Louise, after his daughter. He stayed there every winter until his death in 1868, and his statue stands in the nearby Allées de la Liberté.In the south of France, other British visitors started exploring what was to become the Côte d'Azur. In 1834, Lord Brougham discovered a small village named Cannes.

READ ALSO:

Seven myths about British nationals living in France

Artists’ time

During the inter-war period, British and Irish artists and intellectuals were attracted to France. Playwright George Bernard Shaw came every year to stay in the mythical Eden Roc Hotel in Cap d'Antibes; H.G. Wells, the father of modern science fiction, preferred the town of Grasse. In 1927, Wells had the Lou Pidou built, a house in which he lived with his companion Odette Keun, a Dutch journalist.

Nancy Cunard, the “scandalous” writer and rich heiress of the eponymous transatlantic shipping company, bought a farm house in Normandy, at the La Chapelle Réanville. She restored the house, known as Le Puits carré (“the square well”), with writer and poet Louis Aragon. There she launched the Hours Press, her publishing house, and there produced twenty or so books, including texts by Samuel Beckett. Badly damaged during World War II, the house is now completely abandoned. But the memory of the couple remains; Aragon’s name was given to a nearby secondary school.

With the war’s end, former residents such as Graham Green (Travels with my Aunt, 1969) and Somerset Maugham (The Razor’s Edge, 1944) began to return. They and other “old timers” were soon outnumbered by new arrivals. In the mid-1980s, the writer William Boyd (A Good man in Africa, 1981) bought an estate in Sadillac, near Bergerac in the Dordogne, where he produces his own wine. During the same time, in Provence, Peter Mayle lived and wrote his ode to the French lifestyle, A Year in Provence (1989). By the end of the 1990s, more and more Britons were crossing the Channel with the intention of settling somewhere deep in the French countryside, be it in Normandy, the interior of Brittany, or in Limousin, where rural houses are inexpensive by UK standards.

The romance endures

Unable to buy the cottage of their dreams in the UK, retirees and others from the less monied classes are now contributing to the revitalisation of rural France. Whether they are optimistic or pessimistic, whether or not their pensions are paid in sterling, most of those who live in France or who wish to do so have been considering Brexit with some apprehension. Has this prospect discouraged those who planned to purchase a property in France?

The majority of British (65%) who were intending to buy a house in France prior to Brexit do not seem to have changed their minds. According to the 9th edition of the Investing & Living Abroad report from BNP Paribas, 23% of the potential buyers are considering accelerating their efforts – the fear is that their plans could be hindered when the divorce between the UK and the EU is formalised.

UK citizens remain the first buyers of real estate in France, while in Paris itself, Americans and Italians come first. Indeed, there the resources needed by would-be property owners are necessarily greater than those available to the average Briton who hopes to settle in some remote farmhouse.

Peter Mayle, author of A Year in Provence. Patrick Gaudin/FlickrCC BY

Thus in two centuries, the profile of the British in France has completely changed. In the beginning of the 19th century it was the lovers of French culture and the admirers of the Revolution of 1789, enlightened amateurs, hedonists, and cosmopolitans. They were gradually joined and progressively replaced by the first “tourists” travelling in groups, chaperoned by Thomas Cook and Co, and later by writers and artists who came to seek inspiration in the Latin Quarter or around Montparnasse.

While these earlier residents would sometimes buy an apartment, their enthusiasm for owning property in France was nothing compared to that of the British citizens, who at the end of the 20th century and the beginning of the 21st are now helping revitalise rural France. And so even as it changes form, the longstanding passion of the British for real estate in France endures.

This article first appeared on the website The Conversation.

Diana Cooper-Richet is a researcher at the Center for Cultural History of Contemporary Societies, University of Versailles Saint-Quentin en Yvelines – Paris-Saclay University.

 

 

 

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BRITS IN FRANCE

6 pension questions British people should ask before retiring to France

If you're British and thinking of retiring to France there are some important questions to think about before you make the move, and before you make any decisions about your UK pension.

6 pension questions British people should ask before retiring to France

Retiring to France is a dream for many, but before turning that dream into reality there are some serious financial questions that you need to ask yourself to ensure that your retirement is a financially comfortable one.

For most retirees, their main or only income will be a UK pension, so it’s important that you understand how your pension will work once you make the move. 

There are some specific rules and restrictions on taking pensions out of the UK, while there is also the question of how UK pensions interact with the French tax system.

Financial adviser, Maeve Hoffman, from Spectrum IFA Group, emphasised that people should not take these decisions lightly, telling The Local: “Figuring out what to do with your pension should be part of your wider financial plans for your life.

“This may be your most important asset, besides your home, and the best answer for what to do with your pension is highly individual. There are no sweeping generalisations when it comes to advice on private pensions. Everyone’s situation is different,” she said.

This article is intended as an overview of how the system works for UK pensioners and is not intended as a substitute for individual financial advice. The article is aimed at people who have worked most or all of their career in the UK and then intend to retire in France – the situation is slightly different for people who work in France and then retire here.

You can find an overview on French tax rules for pensions HERE.

Long-term or short-term

The first thing you need to carefully consider is whether or not your move to France will be for the long-term or short-term. 

When it comes to your UK pension, there are some options that may be advantageous for French residents looking to stay here permanently, but they could make your life very complicated if you end up returning to the UK in the future. 

Do not be afraid to ask yourself the tough questions – is there any chance you will have grandchildren in the future that you will want to be geographically close to? Have you ever spent a significant time in France, aside from short holidays? Do you have roots in France, such as friends, family or a home? If your health deteriorates, will you want to be cared for in France or the UK?

If are unsure about the answers to these questions, then take some time to really think about them. There are alternatives to permanently moving to France if you are unsure – for example, you could spend a few months a year here on a short-term visitor’s visa.

READ MORE: Reader question: Can I retire to France and open a gîte?

Understanding the different tax rules

British retirees should be aware that the UK and France have very different tax systems.

Once you become a tax resident in France, you have to file a yearly declaration, including your global income. The country that gets to tax that income is determined based on the tax treaty between the UK and France, which seeks to eliminate double-taxation. 

READ MORE: EXPLAINED: The rules on tax residency in France

As for your UK-based pension, the treaty states that if you have a UK government or civil service pension (eg a state school teachers’ pension), then this will remain taxable only in the UK. Some old NHS pensions were considered ‘government pensions’, but modern ones might not be. You can check if your pension is classified as ‘government’ here.

You still have to declare this income to the French tax authorities, but you will not be subject to tax in France on it. That being said, it will count towards your total household income, and could end up pushing you into a higher tax bracket which is something you should carefully consider, particularly if you want to take a large sum at once. 

The same is not true of private pensions: these are taxed in France, not the UK, as soon as you become a tax resident here. Confusingly, the UK state pension is also considered a private pension, even though it is paid by the government.

You can find a complete guide to how UK pensions are taxed in France HERE.

As a result, you will want to think about whether your previous plans for your private pension were only advantageous to you as a UK resident. Once you become a French tax resident, they could have unforeseen implications.

You can find more information about tax rates in our tax guide. 

Get reliable, expert financial advice before doing anything

If you have decided you want to be in France permanently, then you will need some expert tax and pension advice – but you need to be careful who you take advice from, this is a highly specialist area and it’s unlikely that high street financial advisers will have the knowledge that you need. 

Brexit has also made getting financial advice more complicated, with fewer experts available.

Maeve told us: “Because of Brexit, you cannot use a UK-based financial adviser anymore – you have to use an EU-registered one. This has made things more complicated. When picking an adviser, seek out someone who has expertise on the local taxation rules in France. They should also be regulated with the financial regulator where you live and where they work.” 

It can be especially complicated to parse out who you can and cannot take advice from – for example, some UK-based advisers have continued to give advice to EU-based clients, even though this can be particularly risky if the investments they recommend do not follow EU regulations.

There are also expat-oriented financial advice services that are located outside of France, but seek to offer tax advice to people in France.

She added: “Be smart and sensible. If you choose an adviser in Dubai or Spain for example, you will now be adding another regulatory organisation into the mix, plus another language.

“There are free, government-based services in the UK that can help you understand your private pension – Pension Wise and Money Helper. Before doing anything, you should consult the free services. Any financial adviser worth their salt would recommend this too. 

“These services have begun to have longer wait times, so be sure to book well in advance of when you plan to draw from your pension.”

Deciding whether to transfer your pension

Another question that is important for Brits to think about is whether or not to transfer their pension into either a UK-based SIPP for non-residents, or a QROPS (Qualifying Recognised Overseas Pension Schemes).

The SIPP will keep your pension in the UK, while the QROPS moves it out of the UK, to Malta specifically. 

These options can be helpful for French residents, but you need to familiarise yourself with their benefits and drawbacks.

“The QROPS is not for someone who is unsure of their future in France, as if you return to the UK within five years of the pension transfer HMRC will seek their tax back as if it was a full encashment,” Maeve said.

In France, a QROPS is considered a trust, you may also have additional reporting requirements to fill out along with your annual declaration (more info here).

You should beware of scams on this subject, as the post-Brexit period saw many scammers seeking to persuade Brits that it was now mandatory to transfer their UK pension – always be wary of any cold-calling or unsolicited financial advice.

READ MORE: Ask the expert: How to avoid pension scams when you retire to France

Determining how you will want to draw from your pension

The next question is how you want to receive your pension – either as regular income or as a lump sum. The option that you chose will have tax implications in France.

If you receive it as a regular income, when doing your yearly French tax declaration, you will add up your pension income for that year and you will be taxed at the normal marginal rates for income (the barème). These rates go up to 45 percent (for the highest earners only) plus social charges if they apply (more on this below).

Pension income can also benefit from a 10 percent tax deduction, as long as it does not exceed €4,123 or fall below €422 per household.

Lump-sums are more complicated. Technically, French tax authorities would allow a return of once off pension capital to be taxed at a flat rate of 7.5 percent. 

But in reality, Hoffman explained that anyone seeking to do this would need the express, written confirmation from French tax authorities that this rate will be applied.

She also explained that the type of private pension matters when seeking to get the lump-sum flat rate.

“There are plenty of different types of private pensions in the UK, but the old ‘defined benefit schemes’ have been the gold-plated standard. These are the types of pensions that give you a portion of your salary for the rest of your life. 

“In principle, you should be able to take out lump-sum of 25 percent of your ‘defined benefit scheme’ pension and be taxed at the 7.5 percent flat-rate. That being said, some people get refused, so you cannot make any assumptions and you need clarification from the French tax office.

“As for all of the other types of private pensions in the UK, like the money purchase or personal pension schemes, these are considered to be ‘funds’. If you want to benefit from the lump-sum then you would have to take out the entire pension. You would not be able to just take out 25 percent and get the lump-sum rate.

“For anyone considering taking their whole pension and seeking to use the 7.5 percent rate there are conditions to be met, so I advise people to write to their French tax office and explain their own situation in detail. Be sure to clarify the tax rate you are seeking to have applied and ask what documents they would need from your UK pension company to confirm that the contributions to this pension have been tax deductible.”

Healthcare and social charges

Deductions in France come in two types – impôts (income taxes) and prélèvements sociaux (social charges).

People who retire to France (and have never worked in France) and have already reached the state pension age can apply for the S1 – this means that the UK continues to pay for their healthcare costs and they would not be charged prélèvements sociaux. Non-working spouses of an S1 holder can also benefit from this.

People who take early retirement and make the move before they reach state pension age may have to pay social charges in addition to taxes until they reach the state pension age and can apply for their S1. However, there are several exemptions to social charges, so even if you expect a bill, you may not end up being charged. More information in our guide.

Social charges help pay for a lot of services from the French government, including access to healthcare. In France, you can access the state healthcare system (and get a carte vitale) after three months of residency. 

READ MORE: Why you might get an unexpected French health bill
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