French Life-expat France

Suitably dramatic headline, don’t you think! Lots of people do it, and move back to the UK or wherever they came from, for a whole load of reasons. Well, two really - running out of money, and the French language - but lots of different explanations are given.

Actually there is also a third reason. If someone wants to start a business that can be located anywhere in Europe - internet based, for example - France is not often the best place to choose.

Anyway, for all that we aren’t selling up or moving back anywhere, although we quite fancied moving down the road or starting a new project in the neighbourhood. But the French tax system seems to have other ideas.

A bit of background (and forward warning for anyone in a similar position) . We bought an old farmhouse five years ago, with a derelict cottage and a old barn next to it. After three years of renovating the cottage and the barn, we moved into the barn and rented out the house and cottage as gites. Sounds straightforward enough.

Now, we think, shall we sell the houses and stay living in the barn, or sell the barn and move back into the house, or sell the whole ensemble? Plenty of choices, and it didn’t take long to find interested buyers. Next stop the notaire.

Can we split the property and sell the house, we asked? Well, since we’re living in the barn the house can no longer be called a principal residence, so we would have to pay hefty capital gains tax (plus value immobilier as we like to call it in France).

OK fair enough, we said, we’ll sell the barn and move back into the house - the barn, after all, is our principal residence. Good, they agreed, no capital gains tax to pay there. Unfortunately, since the renovation took place less than five years ago, the capital gains tax rules don’t apply anyway, the VAT rules do.

If a house is sold within five years of being built or completely renovated, VAT (TVA) of 19.6% of the sale price must be handed over to the state. Whether it is a principal residence or not doesn’t come into the matter.

OK, we said, last chance. We’ll sell the whole lot as one ensemble - we bought an ensemble, and that’s what we’ll sell. Errr, no. If we do that we have to pay both the capital gains tax on the house AND the VAT on the barn.

Now you’re probably thinking, just pay the tax and do what you want to do. But we need to buy another house out of the proceeds, and if we’ve given 20% of the proceeds away that will be impossible.

Happily, we’re not too bothered if we stay here. The gites are going well, we all like it here and so on. So that, I suppose, is what we’ll do.

The final option is to increase the price. It’s quite possible we’d set the price too low this time - judging by the number of enquiries - but that seemed easier for a smooth sale.

Otherwise we just need to live in the barn for three years to get out of the TVA trap, sell it, then move into the house and live in there for two years to make that our principal private residence.

Five years time, and we’re off!