Buying French Property with a UK Company - Tax Issues

Could a UK company or entity hold land?

Yes. You can use any UK entity, which under UK law has capacity to own land.

Why use a UK company?

• The UK Company is cheaper to set up.
• Shares can be transferred easily without a French notary.
• If you do not become French resident then the shares are outside the French Inheritance Tax net but within the UK Inheritance Tax net. This means that say gifts by will to a surviving spouse, which may be taxable in France, are not normally taxable in the UK.
• You could put the shares into an English or offshore trust. This route is likely to be better than the use of a tax haven company owning the property direct for the reasons given below.

Arguments against a UK company?

• The UK company will be taxable in the UK on any capital gain you make.
• The "benefit in kind" issue: a director may be taxed on use of the property as this is a benefit to him
• You will have potential additional tax liabilities when you distribute the net sale proceeds from the company or liquidate the company. It is unlikely to be a suitable vehicle for most people buying a second home.
• Buyers are normally reluctant to buy shares in a company and normally insist on the property being transferred from the company to them.

A British trust

The trustees will be viewed for tax purposes as owning the property outright or as a partnership or possibly as a company. Because of French unfamiliarity with trusts and the consequent unpredictability of the way the tax authorities will view them it is generally not advisable to buy French property using a trust. If tax planning or structuring the transaction requires the use of trust money it is likely to be better to structure it as a loan from the trustees to the beneficiary.