Overseas Chambers of Peter Harris

Overseas Chambers
c/o Addington Chambers
160, Fleet Street,
London EC4A 2DQ,
United Kingdom
https://addingtonchambers.com

Fellow of the European Law Institute Vienna
https://overseaschambers.com/
Barrister at Law - Regulated by
the Bar Standards Board
Bar Mututal insurance: 8015/009

Are your clients missing out on the usufruit IHT issue?

March 15th 2016

 

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 For the most part, they will therefore be unaware of how the principle of direct seisin was not repealed by Parliament in relation to foreign immovable property, at great cost to their clients within the EU.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.