If you already own a property in France, or are thinking about acquiring one, if only to gloat to the locals about recent events on the footballing front, then the following may be of interest to you.

French Law is not based on the same principals as English Law and in particular, the rules of succession with regard to ownership of property can have some very unpleasant implications when contrasted with the provisions of one's intended beneficiaries.

Until recently, a relatively common plan to ensure that one's French property was distributed in accordance with your wishes as drafted in your UK Will for example, would be to set up the ownership of the property in France via a "sociétés civiles immobilières". This vehicle gives a form of corporate ownership but with minimal French tax consequences, but specifically means that the Rules of Succession in France do not apply and the individual's law in the place of his domicile does.

However, the Revenue have recently been successful in the Courts and have published their views following these cases as to why they believe these sociétés civiles immobilières give rise to income tax charges on the individuals owning them back in the UK.

Broadly speaking the Revenue argue that the Sociétés Civiles Immobilières are effectively corporate structures and that the UK individuals are shadow directors and therefore subject to the "benefit in kind" rules that apply to companies supplying directors with free or cheap accommodation.

Unfortunately at present, there are a number of conflicting legal views being publicised as to which way the land will eventually lie on this issue.

As can be seen from the above, it can be quite easy to mitigate the effects of the Succession Rules in France but trigger some unexpected income tax charges in the UK. Out of the frying pan into the fire is the expression that comes to mind.

The point is however that as always, advice should always be sought from your professional advisers both in the UK and in any other jurisdiction in which you are undertaking transactions, to ensure that you are fully aware of all issues arising.

The whole area of investing overseas is beyond the scope of this article intended to address the one specific issue recently brought to light, but of course, should you wish to discuss your affairs in more detail, please do not hesitate to get in touch with your usual contact at Nunn Hayward, or Stephen Cook one of our tax partners.

Registered Auditors, Licensed Insolvency Practitioners and authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales.

This publication has been prepared as a guide only to topics of current financial and business interest. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by us. All rights reserved.

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