Monday, 19 November 2018

Brexit and the exchange rate

4 potential scenarios as we see them

Just over one week ago, the GBP to EUR exchange rate had hit the best price in over a year with hopes that a new Brexit deal was ready to be done- these hopes were quickly dashed after the cabinet had actually approved the deal followed by several high profile resignations in Govt.

Since then there have also been calls for a vote of no confidence in the Prime Minister with some letters actually going into the 1922 committee - today, it not known whether there are enough letters to trigger this challenge or not.

Over the weekend, the PM has been actively promoting her deal around to gain support- and it seems that many members of Government are willing to back the PM, but perhaps only after some changes to the current deal.

At this point, it is pretty unclear which direction things will move - the 4 potential scenarios we see are :
  • The UK & EU conclude the deal, and it is approved by House of Commons (leading to Sterling strength)
  • The UK & EU make their deal, and it is voted down by the House of Commons- potentially triggering a vote of no confidence in Theresa May (Undoubtedly this would lead to Sterling weakness)
  • An immediate vote of no confidence (Again creating Sterling weakness)
  • Changes to the deal being made, and then being presented to the EU (One assumes resulting Sterling strength)

Economic news and figures are irrelevant while this all of this is happening- as the £ will only really move on political news.Therefore if you have an upcoming transaction please speak to us and our currency partners about methods to hedge yourself against the volatility in the market.

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Monday, 8 October 2018

Implementation of PAYE system in France from January 2019

After years of promises, discussions and abandoned reforms, France is finally ready to change the way income tax is collected. As from 1 January 2019, France will operate a pay-as-you-earn (PAYE) system.

How is the French tax system changing?

Currently, French tax residents file an annual income tax return and pay their income tax the year after the income was received. This is done through a one-off payment, three monthly payments or ten monthly payments based on the previous year’s taxes. As a result of the new French tax law, from 1 January 2019 French tax residents will be subject to a monthly withholding tax on their income for that year. So, in 2019 they will pay tax on 2019 income rather than paying the 2018 income tax when they file their 2018 tax return. This affects anyone living and/or working in France with French and foreign source income, as well as non-French tax residents with French source income.

Complex tax reform

The way French tax is calculated (joint tax return for households/numerous tax deductions and tax credits), and the specific French filing tax requirements which imposes a tax return to be filed the year after the income is received, will be maintained. This causes complexity, particularly for investments decisions in 2018 and in 2019 when the new system is implemented. Not all income will be subject to the new withholding tax system.

The following types of income will be subject to the new PAYE system:

• Employment income/salaries (excluding wages paid by non-French legal employers through a payroll outside France)
• Taxable state benefits (e.g. sickness, unemployment)
• Retirement income (pensions, lifetime annuities)
• Maintenance payments
• Non-French income taxable in France (including UK pensions paid to a UK retiree
• resident in France)
• Rental income (including French property rental income of UK residents)
• Business profits
• Consultancy fees / independent income

The following types of income/gains will be excluded from the PAYE system:

• Investment income (i.e. dividends or interest) including gains from life insurance policies
• Capital gains deriving from real estate property and financial investments (e.g. sale of
• stocks/shares)
• Non-French income which is subject to French tax credit in accordance with a double tax treaty (UK rental income of a French resident falls into this category)

How PAYE will be collected at source

1) Collected by the paying agent through the PAYE system. PAYE on French source salaries, French source pensions and state benefits will be collected at source by whoever pays them. For salaries, it will be employers; for pensions, the pension administrators, and for unemployment benefits, the national unemployment agency. The collecting agent is solely responsible for collecting the correct amount of tax and taxpayers themselves cannot be held liable for any errors or omissions.

2) Collected by the French tax authorities through monthly direct debit from the taxpayer’s bank account. For all other types of income (including business profits and independent income, rental income, maintenance payments, purchased lifetime annuities and non-French source income concerned by the PAYE), the French tax authorities will collect the tax either monthly or quarterly by direct debit from a bank account provided by the taxpayer. The monthly debit will represent 1/12 of the 2017 income tax as calculated at the bottom of the last tax bill issued in August. The taxpayer will incur penalties if the tax authorities are unable to collect the tax, for example due to insufficient funds in the account.

Investment income not affected by the PAYE system

All other income not impacted by the PAYE, such as interest, dividends, capital gains, gains from life insurance policies (depending on the contract’s date) will continue to be subject to the 30% flat tax rate. As now, the taxpayer can elect for the progressive income tax rate instead (keeping in mind that this election must cover all their income). For the year 2018, with the application of the new system of taxation, the 30% flat tax rate applies to all the gains deriving from investments made after 27 September 2017.

The favourable income tax rate of 7.5% granted to policies held for eight or more years is still applicable to policies which do not exceed €150,000 per person (€300,000 for a joint policy). For investments made before 27 September 2017, tax can still be paid under the “Prélèvement ForfaitaireLibératoire” system to benefit from the income tax rates of 7.5% and 15%. Policies held for more than eight years will continue to receive the €4,600 allowance (€9,200 for married couples / PACS partners).

The existing “Prélèvement Forfaitaire non Libératoire” system for paying tax on foreign source dividends and distribution applies to Assurance-Vie gains deriving from investments made after 27 September 2017. It is French tax residents’ responsibility to file a specific tax form and pay the 30% flat tax by the 15th of the month following the withdrawal. You should take personalised, professional advice to establish which would be the best tax option for you when filing your tax return.


The taxpayer can choose one of the following three options to determine the withholding tax Rate for the PAYE:

1. The average income tax rate applied the previous calendar tax year (so year 2017 for 2019 income) and which is specified on their last tax bill issued in August/September.

2. Joint filers may also request separate rates depending upon their respective incomes.

3. In the absence of the known tax rate, a “neutral rate” may apply for employees.

There will be a certain degree of flexibility for an individual to increase or decrease their withholding tax rate. Adjustment must be requested via the taxpayers’ online tax account on the Ministry of Finance website The local tax centre will be responsible for calculating the revised withholding tax rate and transmitting this to the employer.

Income tax return

There will still be an obligation to file an income tax return in the year following that in which the income was received. The tax return for income received in calendar year 2018 will be filed in May/June 2019. Any balance of tax due must be settled by the end of the year (penalties will apply for non-payment). Or, where applicable, the tax authorities will refund any overpayment.

2018 = ‘Blank year’? Tax-free year or ‘Année blanche’

If you hope to qualify for a tax-free year or “blank” fiscal year for 2018, you may be disappointed.

2018 income will still have to be declared, but it will be neutralised by the CIMR tax credit – (“Crédit d’Impôt de Modernisation du Recouvrement” or “Tax Credit for the Modernisation of the Recovery”.) Exceptional income and excessive increases in current income will not be neutralised by the CIMR and will therefore be taxed. Exceptional income not neutralised by the CIMR (and therefore taxed for the year 2018) includes: severance pay of employees and compensation paid to corporate officers; pension benefits paid in the form of capital; sums withdrawn on a Salary Savings Plan, and in general, any other income which is not likely to be collected annually.

When it comes to rental income, independent income and business income, limitations have been set up to avoid taxpayers receiving higher income in 2018. For 2018, with the calculation of the CIMR, taxable income will be taxed at the average rate of tax and not the usual marginal tax rate. This could be interesting for taxpayers who received gains from an insurance policy and benefit from the 12.8% flat tax rate.

This new PAYE system is an interesting development for France and will be of benefit to those receiving French source employment or pension income. Those receiving investment income or foreign pension income should clarify what, if anything, they need to do and what their options are.

Article kindly provided by Blevins Franks with thanks also to Catherine Terry, Tax Lawyer,, for providing information on this complex French PAYE tax reform.

Monday, 24 September 2018

Sterling Hit by Serious Brexit Turbulence

Week of Weakness for GBP/EUR on Brexit Fears

Last week was one to forget for Pound traders, with GBP/EUR exchange rate gains made from Monday to Thursday being erased by a sharp drop on Friday.

Sterling initially rose when higher UK inflation and resilient retail sector stats came out, but gave it all away to Brexit fears sparked by an EU summit.

Prime Minister Theresa May attended a meeting of EU leaders in Salzburg but left under a cloud after her ‘Chequers plan’ for Brexit was roundly rejected.

Amid growing fears of a no-deal Brexit outcome, Mrs May held a conference on Friday and further devalued the Pound by declaring Brexit talks to be ‘at an impasse’.
Euro Outlook: Volatility ahead on Inflation and Expectations Data

Barring any surprise statements on Brexit this week, the Euro is likely to be the dominant currency in the GBP/EUR pairing until Friday.

This morning’s Ifo measures of German economic confidence could cause early EUR/GBP exchange rate losses, as all three surveys are expected to show falling sentiment.

The Euro might make additional losses on Thursday morning, as a spread of Eurozone economic confidence measures are also forecast to decline.

The main data releases to watch out for are September’s business and consumer confidence measurements, both of which are tipped to show falling figures.

What may be a bad week for the Euro could continue on Thursday afternoon, as some economists predict that Germany’s year-on-year inflation reading for September will drop from 2% to 1.9%.

Lower inflation in Germany risks causing lower inflation rates across the Eurozone, which in turn reduces the likelihood of a near-term European Central Bank (ECB) interest rate hike.

The UK will finally have a look in on Friday, with a consumer confidence reading followed by GDP growth rate figures.

The first of these, GfK’s consumer confidence data, could weaken Sterling if it shows lower consumer sentiment.

More positively, however, final UK Q2 GDP readings are tipped to confirm growth during the quarter – this could boost Pound Sterling demand.

Despite possible late-week GBP relief, however, the Euro still has a greater chance of rising against the Pound on Friday if German unemployment falls and Eurozone-wide inflation is reported higher.

Key Events

24th September

09:00 Ifo German Economic Confidence Surveys

27th September

10:00 Eurozone Business Confidence

10:00 Eurozone Consumer Confidence

13:00 German Inflation Rate

28th September

00:01 UK GfK Consumer Confidence

08:55 German Unemployment Rate

09:30 UK Q2 GDP

10:00 Eurozone Inflation Rate

Article courtesy of Foremost Currency Group

Friday, 17 August 2018

Radon – a new diagnostic report

Very recently, the purchase of a property in France has had yet another diagnostic report added to the lengthening list.

This time it is called E.R.P (Etat des Risques et Pollutions) regarding Radon, to replace ESRIS (État des Servitudes 'Risques' et d'Information sur les Sols).

Quite a large part of France is potentially impacted. The map below gives a general overview.

Within the zones highlighted, there are areas where there are volcanic or granite areas, plus some sandstone areas which can be affected. 

The degree of Radon could be very localised, and can vary significantly even within a small commune.
Radon is everywhere, as it is formed from the uranium in all rocks and soils. Outdoors everywhere and indoors in many areas the radon levels are low and the risk to health is small. The darker the colour on the Radon maps the greater the chance of a high radon level in a building. However not all buildings, even in the darkest areas, have high levels.
If you have a home in a Radon risk area, then you can undertake significant work to improve your rating. The aim of remedial work is to reduce radon levels as low as possible. There are several methods that can be used to reduce high radon levels.

Some simple actions such as sealing around loft-hatches, sealing large openings in floors and extra ventilation do not reduce radon levels on their own. When combined with other effective measures, they can improve the reduction of radon levels. Completely sealing floors is difficult and can cause rot in wooden floors.

Below is a map of the UK, identifying areas affected by Radon

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