French culture is very family-orientated and it is therefore not surprising that moving to France has an increasing appeal to young families with dependant school-age children. But how to adopt a French lifestyle and maintain the necessary household income to sustain it is a common challenge for those contemplating such a move.
For many couples the solution is for the family to be resident in France, while the main breadwinner continues to work in the UK. This scenario inevitably raises questions of taxation and access to welfare benefits, including health service cover.
In respect to income tax, where a member of the household is working and earning in the UK then tax on those earnings will be payable in the UK. If the income earner is employed, including as a director of an owner-managed company, then UK income tax will be collected through the employer’s PAYE scheme. If self-employed, then a UK self-assessment tax return will need to be completed each year.
Normally income earned in the UK will still need to be declared in France. It will not be taxed again but will be used to determine the tax rate applying to other household income received in France, including worldwide investment income.
Under certain circumstances, it may be possible to agree with the French tax authority that the working spouse is not tax resident in France. In this case, income earned in the UK would not be declarable in France and the French resident ‘household’ for French tax purposes would consist solely of the non-working spouse and any children. However, the French tax office would expect the French resident non-working spouse to declare as income any ‘allowance’ paid to him or her by the UK resident spouse.
If contemplating this approach, it would be sensible to take specialist tax advice to determine which option would be most beneficial in terms of overall tax payable in the UK and France.
With regard to health cover, the provision of social welfare benefits, including health service benefits, is governed by European Council Regulation No 883/2004 which regulates the coordination of social security systems across EU member states.
Under these regulations, a cross-border employee or self-employed person is able to arrange for his or her family to have access to the French state health system by maintaining payment of National Insurance contributions in the UK.
Where one spouse works and lives in the UK, while the family is resident in France, then the working spouse needs to apply to the UK Department of Work & Pensions for an S1 form. This is done by completion and submission of HMRC Form CA8454 03/10 ‘Application for Health Cover in the European Economic Area’.
It will be seen from the questions asked on this form that not every scenario is clear cut and a caseworker will review your exact circumstances to check that you and your family in France are entitled to free access to the French healthcare system, paid for from the UK. In particular, there is something of a ‘grey area’ for those working in consultancy or service functions where work for a UK employer or for clients of a self-employed business might be carried out from home in France by remote IT tele-working.
Many families who feel the ‘absent parent’ route would prove too disruptive for their preferred family lifestyle prefer to explore the possibility of generating income from some form of self-employment in France. In recent years, the introduction of the auto-entrepreneur system has made the establishment and running of a small business in France far less bureaucratically onerous.
Nevertheless, anyone contemplating this option is advised to take good accountancy advice in France as there is a considerable choice of business and tax structures available and it is important to select the one most appropriate to the nature and scale of the intended business. Through this route, social security contributions are payable in France which provides access to the French health service for business owners and family.
Blevins Franks is the leading international tax and wealth management advisers to British nationals living in Europe. Contact: 0800 668 1381 Freephone UK, 0805 112 163 Freephone France, [email protected] or visit www.blevinsfranks.com for more information.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.