Usufruits again? Yes, because the issues and problems are still
there, as are our solutions.
If you are interested in a French property under a usufruit
dismemberment, and there are several ways in which this might
happen outside your own control, then you may have sought advice
from a firm of solicitors which has told you that they do not
understand the concept, and woe betide anyone who attempts to
address them. Ignorance is no excuse for failing to instruct
competent Counsel to achieve a considerable tax saving by simply
declaring correctly.
There are also English firms with recently inducted French
lawyers who may understand usufruit dismemberments, but have
yet to achieve the necessary competence to comprehend what a
settlement is under English tax law, and the manner in which they
can separate a usufruit from a settlement for IHT purposes. There
are French avocats advising out of their limited exposurre give to
English land law on a conversion course, that they understand
settlements, and the English property legislation, who frankly do
not have the necessary experience or detailed understanding to give
more than a superficial and therefore flawed analysis of the legal
position as a whole; and therefore miss the vital fiscal points
available to them.
They also do not yet understand that reference to an English
Barrister qualifed in French tax law is a possibility that can
benefit their clientèle: that is yourselves.
The same criticism can be levelled in a different area at those
solicitors who have not studied land law at a university level, but
rely upon a conversion course limited to the post 1925 property
legislation. They will not have studied the pre-existing land law
of England and Wales, notably the changes in the Land Transfer
Act 1897. For the most part, they will therefore be unaware of
how the principle of direct seisin was not repealed by Parliament
in relation to foreign immovable property, at great cost to their
clients within the EU.
The reality of the legal and fiscal position has been argued
successfully in several cases by Overseas Chambers before HMRC who
has been unable to argue the contrary. We are not at liberty to
divulge client information and therefore are not going to give the
many examples where HMRC have been forced, by a simple opinion on
the laws of England and of France, the private international law
and conflict of laws position, and then an annihilation of HMRC's
pretentions that a French dismemberment cerating a usufruit or
similar droit réel is a form of settlement, rather than a Part I
ITA 1984 disposal to be taxed outside the settlement provisions of
Part II of the ITA 1984. Sounds complicated? It is not, it is
simplicity of analysis removing complications caused by a greedy
tax administration which does not respect its own laws, and even
less those of another Member State of the European Union.
If your solicitor or accountant has not given you this
information and shows no sign of so doing, you should instruct them
to contact an dinstruct Overseas Chambers for advice and assistance
immediately to remedy the situation in which you find yourself
before the error takes on a life of its own.
If you are in France, it is equally likely that you will not
have heard the news either, but that has changed with the following
publication by a reputable and indeed formidable civil law
institution working the level of the European Union, the Centre
Notarial de Droit Européen in France.
I stress this, as the CNDE is the main institution heading up
the implementation of the EU Succession Regulation n° 650/2012 in
France, in which the use of the usufruit as a succession planning
tool is an implicit part.
Their legal director Mme Levigne has cited with approbation the
following article published by Peter Harris of Overseas Chambers
which can be found here.
The article to which it refers is published in Droit et
Patrimoine n° 238, which can also be found on the Press Articles
section
here, whoch refers back to an earlier article also available on
that page,
here. See the
Press Article section so as not to miss out on publicised
material and other pages on this website for further tools and
assistance in other area.
Overseas Chambers has had a 100% success rate in challenging
HMRC on this principle. Do not be put off by overstretched
solicitors claiming experience, with no actual experience in
the laws and tax régimes of both France and England. Peter Harris
is a recognised expert in both jurisdictions, as the CNDE citation
evidences.
Being bilingual,Peter was trained by inspecteurs des finances in
Paris, he is also the best placed to advise French notaries
on the reality of the situation and the means of achieving correct
treatment on both sides of the Channel. His training is unique.
Whilst handling tax administrations with respect, he deals with
them as equals, not as pawns.
Peter can also advise alongside a Spanish Italian or Portuguese
lawyer on the manner in which a usufructuary arrangement in those
States can also benefit from the same principle.