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Before Brexit, taxpayers living in the UK who were liable to the French social paid a reduced rate of
7.5% (normally 17.2%) on their French real estate income and capital gains. This arose under the EU
Directive on the coordination of social security systems which generally applies to those who are tax
resident outside of France, although it may also be applicable to French residents affiliated to the
NHS.

How did Brexit affect this tax position in the UK?

Due to Brexit, the Directive no longer applied to UK residents with effect from 1 January 2021.
Consequently, French tax offices, and advisers applied the increased 17.2% rate to UK residents.
Unsurprisingly, this triggered a strong backlash in the UK.
On 30 December 2020, the EU and the UK announced the terms of the post-Brexit Trade and
Cooperation Agreement which included new rules on social security coordination between the EU and
UK.

French tax authorities revert to lower rate

In an unforeseen U-turn, French tax authorities decided that the rules in the Trade and Cooperation
Agreement essentially mirrored the rules in the EU Directive, and therefore reverted to the reduced
social charge rate of 7.5% for UK taxpayers. The French tax authorities published their administrative
guidance on this to confirm these welcome changes,

UK taxpayers who received rental income from a French property (or sold one in 2021) are now able
to claim a tax refund for the additional social charges paid. Taxpayers who believe they are
eligible to make a claim have until 31 December 2023 (or until 31 December 2024 in respect of rental
income), to lodge a claim with the French tax authorities.

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frenchtax@da-tax.co.uk

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