What are the rules on gifting a share of French property to a child?
A notaire is required to prepare the deed of gift
When gifting property, there is a €100,000 tax-free allowance
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My daughter (French resident) and I (UK resident) jointly own an apartment in the French Alps. I would now like to give my share to my daughter. What is the best way to do this and will there be any tax implications?
You will need a notaire to prepare the deed of gift. As part of their assistance, they will advise on French gift tax. However, as a UK resident you should take advice to ensure the gift is not negative from a UK perspective.
The gift would be immediately liable to French gift tax, which is calculated in the same way as French IHT.
Your daughter would benefit from a tax-free allowance of €100,000 and gift tax would be payable on any surplus at a rate of 5% to 45%.
This allowance would only renew every 15 years so, if it was extinguished by the gift and you died within this timeframe, she would have no further allowance at your death.
Gift tax does not exist in the UK. However, as a UK resident, the gift may be included in your estate if you die within seven years of the gift and leave a taxable estate. Otherwise, it will be excluded from your estate for UK IHT purposes.
Read more: Can French forced heirship rules be bypassed?
Beware of UK capital gains tax
If the French property is not your main residence, you may be subject to UK CGT on the gift.
Tax is calculated on the “gain” (the difference between the purchase price and value at the date of the gift) minus professional fees, qualifying renovation costs and the personal allowance (currently £3,000). The rates are 18% for basic rate taxpayers and 24% for higher rate taxpayers.
The notaire may recommend a format that is beneficial for French IHT purposes whereby you retain a right to use and enjoy the property.
However, HMRC would regard this as a “gift with reservation of benefit” and insist that the total value of the French property be brought back into your estate for UK IHT purposes.
For this reason, we would advise that any gift be absolute (in which case you should ensure to pay market rent to your daughter if you use it, to avoid falling foul of the same rules).
Antonia Ridley-Hughes is an expert in French succession and estate planning matters at Ashtons Legal
