As from the day that the United Kingdom withdraws from the
European Union, the position of United Kingdom residents, and by
implication, but to a lesser effective extent for those
resident in the Channel Islands and the Isle of Man will change to
being that of non-EU residents.
That means that the protections given under the EU Treaties will
One of those protections was the obligatory classification of
taxes and contributions between social security and taxation, which
were given a separate status.
Here, the French prélèvements sociaux, a form
of quasi-"taxation" destined to refinance the French social
security deficit, were classified by the CJEU in the de Ruyter Case
Case n° C‑623/13) as a form of social security payment or
contribution which were therefore subject to the EU social security
jurisdictional restrictions set out in the EU Regulations on the
matter. That system imposed being subject to only one social
security régime in the Member State of residence, not several
systems using the source of the income, for example, from
employment in or activities in, or property in another Member
That preliminary ruling against France mean that individuals
resident in the United Kingdom and subject to National
Insurance contributions should not be called upon to pay the
prélèvements sociaux required by the French under a
combination of article 164A, 164B of the Code général des
impôts (CGI) and article L.136 pf the Code de la
sécurité sociale (CSS).
For the moment, minds are set upon the French Government's
failure and cotinuing refusal to implement the full consequences of
the de Ruyter ruling in the treatment of capital gains on immovable
property in France. These are subject to Capital Gains
taxation, a subdivision of income tax, under articles 164A
and B CGI, upon which L 136.1 of the code de la sécurité
sociale (CSS) piggybacks to place the Prélèvement on the same level
as to collection and enforcement as the French income taxation on
capital gains (equivalent to Capital Gains Tax).
Despite the clear decision in de Ruyter, the French
administration continues to refuse to register land transfers
giving good title to the purchaser, unless the prélèvement is
paid by the notary on behalf of the vendor out of the price
of sale. Post-Brexit it is probable that it will no longer be
the notary dealing with the declarations and payments, but a
government regulated Réprésentant Fiscal.
In short, the French are now saying that the EU rulings do not
displace their own "tax", as opposed to their social security
legislation. By a regulatory sleight of hand, the
non-resident prélèvements now finance non contributory funds in the
French social security netwerk, in a smoke and mirrors operation
which the French administration would carectarise as an abus de
droit iere a taxpayer to conconct such a scheme.
Once Brexit becomes effective, there will be even less
protection for British residents, as the National Insurance
contribution structure will in principle become a Third State
system. It is unlikely, even if it is aware of the issue,
that the British Government will be able to obtain EU status
equivalence for its social security system and its residents to the
extent necessary for the present rights continue, whether or not
they are flouted by the French administration.
The CJEU has recently held taht a French national resident in
China and subject to the Chinese social security system does not
benefit from any internal EU protection. That means that,
post Brexit, the EU protection for both French nationals resident
in the United Kingdom, and other United Kingdom residents will not
longer be available, unless there is a pan-European régime
instituted including the United Kingdom similar say to the Swiss or
So, what the British Government must ensure is that the
remaining tax allocation issues in article 164 B are dealt with
generally at the EU level, and not left to the sole protection, if
such it can be termed, of the Double Tax Treaty between France and
the United Kingdom.
Otherwise the entire British Islands will become subject to
Third country exposure to withholding taxation and other fiscal
issues to which they are currently not subject.
The French legislative provisions concerned are set out on the
Resources page at this link.