Comparing the French and UK tax consequences of gift

If you are planning how to leave assets to your family in the most tax-efficient way, it is important to start planning early.

As you may be aware, if you are a UK tax resident and survive the gift for seven years, it is generally considered a Potentially Exempt Transfer (PET) and no inheritance tax will be charged on it.

The same rules apply to the gift of a French property from a UK perspective. For example, if you have a house in Dordogne, worth €200,000, and a flat in Bordeaux valued at €200,000. 

If you gift the Dordogne house to your two children and die ten years later, the Bordeaux flat will be left to your two children as an inheritance without the Dordogne gift having any inheritance tax consequences.

However, from a French perspective, your children are each entitled to a tax-free allowance of €100,000 every 15 years. Therefore, they will not have to pay any French gift tax on the gift of the Dordogne house. However, they will no longer have the benefit of the tax-free allowance on the inheritance of the Bordeaux flat, since you did not survive the 15-year threshold. 

Although there is no French capital gains tax on gifts, the UK will treat the gift as a disposal at market value. UK CGT may be payable immediately if the property has increased in value.

If you require UK/French estate planning advice, please feel free to email us at international@stoneking.co.uk