Viewing posts categorised under: Livret A

UK bank accounts after Brexit

By Occitanie
This article is published on: 20th November 2020

20.11.20

Welcome to the seventh edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Sue Regan, Rob Hesketh, Derek Winsland and Philip Oxley your Spectrum team of advisers in the Occitanie.

As we are approaching the end of 2020, to say that it has been an unusual year would be a gross understatement. Countries across the globe continue to adjust to life with Covid-19 and with the ongoing and ever-changing restrictions that the predicted second wave has brought with it. As this goes to ‘press’ we now find ourselves once again in a national lockdown in France.

Although it had taken a back seat since the virus outbreak, Brexit is once again at the forefront of the minds of UK expats living in the EU. Will there be a trade deal? Are we heading for a cliff-edge ‘No Deal’? It is almost unbelievable that we are still at this point in the deliberations with only eight weeks of the transition period to go.

UK Banks accounts after BREXIT
As the deadline approaches one issue that we are frequently being asked about lately by concerned clients, is that some UK banks have been writing to their customers resident in the EU putting them on notice that their UK bank accounts and credit cards will be closed either at the end of the year or, in some cases even earlier, as a result of Brexit.

Although some banks have already contacted some customers, it is apparent that only some types of account are affected and only in some EU countries. The two main banking institutions that have taken such action so far are Barclays and the Lloyds Banking Group, which includes Lloyds Bank, Halifax and Bank of Scotland. Many other banks have stated that they ‘currently have no plans to close customer accounts, but they are monitoring the situation’. Given that this could potentially affect all of us with ties to the UK banking system, we thought this would be a good topic to focus on this month.
So why are some banks closing UK expats’ accounts?

UK banks and other financial firms are currently allowed to trade as part of the European Economic Area (EEA), as all member countries use the same regulatory framework. This arrangement is known as ‘passporting’, and it is why Brits who have moved abroad have been able to use credit cards and banking services from UK-based banks, even though they’re no longer living in the country. However, once the Brexit transition period ends on 31 December, this passporting arrangement will no longer be in place – that is, unless a specific agreement to carry it on is reached as part of a Brexit deal. With no such deal confirmed, UK banks would have to attempt to negotiate and fulfil the stipulations from every EEA country’s regulator. All of them work differently and a continuation of providing services to UK expats will be more feasible for some banks than others.

The impact on each customer will vary depending on how their bank or financial institution currently operates, the product or service being provided, and the legal and regulatory framework in the country in which they are resident. In effect, this means that the situation is different for each financial service offered by each financial provider in each country; for some banks, offering certain products in certain countries simply won’t work. So, certain services and accounts may be withdrawn in some EU countries but not in others.

We understand that many banks are still trying to figure out a way of working in different EU countries after the Brexit transition period, while also waiting to see if a deal can be agreed between the UK and the EU. The Bank of England and the Financial Conduct Authority (FCA) have written to banks informing them that, if they do decide to close customer accounts, they must have plans in place to service their Europe-based customers properly through the process, taking into account how their actions might impact on customer’s individual circumstances and the alternative products available to them.

What should you do?
DON’T PANIC – there have been some dramatic headlines in the press about the issue, but it is important to stay calm. If you think you will be affected, you should not act in haste and repent at leisure. Give yourself time to work out what your options are.

CHECK THE FACTS CAREFULLY – whether or not you have had a warning letter from your bank, talk to them now and find out what they plan to do on Brexit day. If you still have a UK address, your account may not be closed.

CHECK YOUR SPECIFIC ACCOUNTS – you may find the types of savings products you hold are still permitted in France. Your bank should be able to advise you on this.

ARRANGE FOR PAYMENTS TO BE PAID DIRECTLY TO YOUR FRENCH BANK ACCOUNT – if you are in receipt of the UK State Pension, HMRC will pay this directly to your French account every month and, because of the volume of payments made, the exchange rate is extremely competitive. OK, so the GBP:EUR rate isn’t that great at the moment but at least you will be guaranteed continuity of income if you rely on this to fund your lifestyle in France. Some UK private pension providers will also pay pensions to foreign bank accounts, so it is worth speaking to your provider about this.

OPEN A NEW UK ACCOUNT – find a UK bank that is operating in France (such as HSBC and Santander) and check if you can meet their eligibility criteria for opening a new bank account and that the account will meet your needs. For example, does it require you to have a minimum income or deposit with them?

CONSIDER OPENING A STERLING OFFSHORE BANK ACCOUNT – we have a good connection with a very reputable bank, based in the Isle of Man, that offers accounts in a number of currencies including Sterling and Euros and which will accept regular payments in and direct debits out. If you would like details of the account, please contact your Spectrum adviser.

If you have savings on deposit in the UK that you use for your short-term liquidity or an ‘emergency fund’ and you have been told, or are concerned, that these accounts will be closed, there are a number of tax-free savings accounts available in France, which you should consider maximising, if you have not already done so, including the following:

THE ‘LIVRET A’ – which is currently paying a rate of interest of 0.5% per annum and is available to non-residents. The maximum permitted investment into this type of account is €22,950 per individual.

THE ‘LIVRET DÉVELOPPEMENT DURABLE (LDD)’ – this account is available to residents of France and the maximum investment permitted is €12,000 per individual. It is currently paying an interest rate of 0.5% per annum.

THE ‘LIVRET D’EPARGNE POPULAIRE (LEP)’ – this account is available to residents of France who are on low incomes. The maximum investment amount permitted is €7,700 per individual. The interest rate is currently 1% per annum. For example, in order to open a LEP account in 2020, your ‘revenu fiscal de référence’ in 2018 (as shown on your ‘avis d’imposition’ of 2019) must not have exceed €19,977 for a single person or €30,645 for a two-part household.

But it’s not just bank accounts that might be affected when passporting goes………….

Some UK financial services providers are informing their non-UK resident customers that they will not be able to provide them with advice on their existing UK based investments after 31 December and that ‘you should find a new adviser or cash in your investments’.

As a reminder to our readers, Spectrum in France is a registered French company, regulated in France, and we are not passported in from the UK, so as far as we are concerned, it’s business as usual.

For those of you who still have investments in the UK, whether they be stocks and shares ISAs, investment bonds, pension funds or other investment portfolios, now would be a good time to review these and discuss with your provider as to whether they will be able to continue advising you in a post-Brexit world. Even if your UK provider will be able to continue advising you, they may not be familiar with the French taxation framework and the investments you hold may not be tax efficient in France. We can advise you on investment products that are suitable and tax-efficient for living in France and provide you with ongoing advice to ensure that your financial plan remains on track as your situation and attitude to risk changes over time.

Please don’t forget that, although we may be restricted on where we can travel at the moment, we are here and have the technology to undertake your regular reviews and financial health checks remotely. If you would like a review of your situation, please do not hesitate to get in touch with your Spectrum adviser or via the contact link below.

We’d love to hear from you with any comments and/or questions, as well as suggestions as to future topics for discussion. Please feel free to pass this on to any friends or contacts who you think might find it interesting.

Occitanie@spectrum-ifa.com

French social charges on worldwide investment income

By Spectrum IFA
This article is published on: 1st April 2015

01.04.15

On 26^th February 2015, the European Court of Justice (ECJ) made a very important ruling concerning the application of French social charges (prélèvement sociaux). These charges are levied to fund certain social security benefits in France, as well as the compulsory sickness insurance schemes.

If you are resident in France, you are required to pay the social charges on all your worldwide investment income and gains and the current rate is 15.5%. However, the payment of these social charges does not actually give you any automatic right to French social security benefits and health cover.

In fact, many early retirees have been refused health cover when their Certificate S1, issued by the UK, has expired, if they have not been resident in France for at least five years. Since having adequate health cover is a condition of French residency, such people have either had to work in France – perhaps even setting up their own business – or they have been obliged to take out private health cover.

It is clear that France considers social charges on investment income and gains as an additional tax, rather than a social security contribution, since the payment does not provide any automatic rights to social security benefits and health cover. However, it is the French Code de Sécurité Sociale, rather than the Code Générale des Impôts, which lays down the conditions under which these social charges are payable in France.

Thankfully, the ECJ has reached a different conclusion. In its determination, the ECJ decided that France’s social charges have a sufficient link with the financing of the country’s social security system and benefits. In addition, there should be no distinction made between those charges payable on earnings and those payable on investment income and gains.

EU Regulation 1408/71 deals with the application of social security schemes to people moving within the European Union. The Regulation provides that people should be subject to the social security legislation of only one Member State (except for very limited situations). To have anything different could lead to unequal treatment between Members States and their citizens, which would be contrary to EU principles.

Therefore, for any French resident who is the holder of a Certificate S1 that has been issued by another Member State, this means that he/she is subject to the social security legislation of the issuing State. As such, the ECJ has ruled that France cannot impose an obligation on the person to pay social charges to France, as this would result in them being subject to the social security legislation of more than one Member State. The ECJ has also ruled that this principle applies whether or not the insured person actually pays social security contributions on the income/gains concerned in the Member State that insures the person.

Since 2012, non-residents have also had to pay the social charges on any French property rental income and on any gains arising when they have sold the French property. There is general opinion now that the ECJ ruling should also bring this to an end, at least for residents who are insured in another EU State.

EU legislation overrides the internal legislation of Member States. Notwithstanding this, we will still need to wait for the French government’s response to this ECJ ruling. Arising out of this, if France accepts the ruling, it will need to amend its own internal codes to ensure compliance with the ruling.

In the meantime, taxpayers can make an application for a refund of social charges paid in 2013 and 2014, by filing a claim with their local tax office before 31^st December 2015. In addition, taxpayers may also wish to refer to the ECJ ruling when submitting their French tax returns for this year, if they believe that they are affected.

On the subject of French tax returns, these are due by 19^th May 2015, if submitting a paper return or if submitting on-line by 26^th May 2015 for departments 01 to 19, by 2^nd June 2015 for departments 20 to 49 and by 9^th June 2015 for other departments. According to the ECB website, the average exchange rate of Sterling to Euros for 2014 is 0.80612.

For those of you who came to live in France during 2014, then you will need to make your first French tax declaration and declare all your worldwide income and gains. This includes income and gains that might be tax-free in another country, for example, UK ISAs, premium bond winnings and Pension Commencement Lump Sums, which are all taxable in France.

Even if the income is taxable in another country, for example a UK government pension and/or UK property rental income, the amount must still be reported in France and it will be taken into account in calculating your French income tax. You will then be given a tax reduction to take into account the fact that the income is taxable elsewhere.

It is also very important to declare the existence of all foreign bank accounts (whatever the amount in the account) and life assurance policies taken out with companies outside of France. Failure to do so can result in a penalty of €1,500 for each undisclosed bank account. However, if the total value of all unreported accounts is €50,000 or more, then the penalty is increased to 5% of the total value of the accounts, if this results in a greater amount. The same penalties also apply for undeclared foreign life assurance contracts.

Pensions – I cannot pass by without saying something on this. I have personally become so fed up with all of the UK changes that I have now taken the decision to transfer all of my own UK pension benefits into a QROPS. I have chosen the well-regulated jurisdiction of Malta and I feel that I am in control of my own retirement planning again. In short, I feel that I will now have a pension for life and not just for Christmas or for the next session of the UK parliament.

With days to go before the reform takes place in the UK, if you are affected, do you understand what this means for you? If not, would you like to have a confidential discussion with me about your situation?

Pensions is one of the major subjects that we are also covering at our client seminars this year, as well as EU Succession Regulations, French taxation, health insurance and currency exchange. We are already taking bookings for Le Tour de Finance 2015 and this is a perfect opportunity to come along and meet industry experts on a broad range of financial matters that are of interest to expatriates. The local events are taking place at:

Perpignan – 19^th May

Bize-Minervois – 20^th May

Montagnac – 21^st May

Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.

Whether or not you are able to come to one of our events, if you would like to have a confidential discussion about pensions, investments and/or inheritance planning, using tax-efficient solutions, please contact me either by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.

Tax efficient saving in France with Livret A & Assurance Vie

By Amanda Johnson
This article is published on: 17th October 2014

When I was a UK resident I was able to take advantage of tax free savings schemes. Are there French products that will allow me to save, tax free, now I live in France?

There are two main tax efficient saving products you can take advantage of as a French resident, Livret A & Assurance Vie.

Livret A is a deposit based account which all banks and the post office offer. It gives you instant access however this is balanced by a modest rate of interest of around 1% p.a. There is also a maximum amount of 22,950 Euros per person you can hold within a Livret A.

An Assurance Vie is an investment which again all banks and financial institutions here in France offer.

I have written about this before yet I think a reminder of the important aspects of the mechanism of “assurance vie” is probably in order here:

An Assurance Vie (“AV”) is a type of insurance however unlike a life insurance policy you may have experienced in the UK, these policies shield any investments from virtually all forms of tax while the funds remain inside the AV. (some funds receive dividend income that has had withholding tax deducted).

AV’s become more tax efficient over time. After 8 years funds can be withdrawn from the AV and taxed at just 7.5% on the gain element only. Funds can be accessed at any time before that, with the gain declared on your annual tax return. Standard social tax remains payable on all gain, but only when drawn.

After eight years your gain is not only tax efficient, but it can be offset against a tax free allowance of (currently) €4,600 per person (€9,200 per couple) per annum. I would be happy to run through this with you as part of a free financial health check.

AV policies are not subject to succession law. Proceeds from an AV policy can be shared amongst any number of beneficiaries. Although the succession tax benefit is reduced when the subscribers are aged over 70, there are still worthwhile benefits to be gained in this area.

What should I ask for in an Assurance Vie?

Portability – Can I take it with me if I move back to England or to another country?
Regulation – Is the company advising me on an Assurance Vie regulated in France?
Fees – No up front entrance fees apart from the money I use to establish the policy?
Social Charges – If & how are Social Charges applied to my AV ?
Currency – Can I invest in Sterling? Euros?

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