Legal director Patrick Delas has responded to a reader’s question in The Sunday Times Home Help feature. The query comes from a couple domiciled in the UK who want to understand the tax implications of gifting a property they own in France to their daughter. She is a French resident but also lets out a property she owns in the UK.
Patrick details the options and implications in both France and the UK. He explains the inheritance tax allowance in France, and in what circumstances the couple would be liable to pay Inheritance Tax (IHT) in the UK (such as passing away within seven years of gifting the property as a potentially except transfer (PET), or holding the property as a ‘usufruct’ in France.) He also highlights that gifting the property as a lifetime transfer would make them immediately liable to pay Capital Gains Tax (CGT) in the UK. Patrick stresses that, ultimately, their exact position is dependent on a number of factors including the property value, allowances available and their plans for the occupation of the property.
“Advisors in France will sometimes suggest a ‘usufruct’, where you have the right to enjoy the property without owning it, as a solution to this situation — this should be avoided as it can give rise to an immediate inheritance tax charge and other complications in the UK"
The full article is available to read online via The Sunday Times, by subscription only.
Patrick Delas is a legal director in the French law team. His specialist work is private international law and includes advising on French and cross-border estate planning (inheritance tax, capital gains tax, wealth tax), French probate and trust reporting.
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