Selling up for French leave

George and Carolyn Scott
Ages 62 and 47
Live in Bristol
Occupation Retired newsagents
Earn Occupational pension
Mortgage None
Debts None
Investments None
Pensions Occupational pensions
Aim To invest proceeds of selling business and home

George and Carolyn Scott have sold their newsagent's business in Bristol and are retiring to France.

They have visited it several times a year, have English and French friends there and George speaks the language fluently. So they have sold their home as well as the business and bought a house near Cahors.

They emigrate in June, when Carolyn's youngest daughter leaves school. They have no plans yet for what they may do in France, although George says: 'I will try to do as little work as possible. At 62, I have been a newsagent for nine years and I thought, "Someone else can have a go".'

But Carolyn, 47, may look for work in France.

Neither do they know what their living expenses will be, although they expect to live modestly. Their outgoings will mainly be household expenses and tax. The new house is in good condition.

Their income initially will be George's pension from a previous job in the National Health Service: an index-linked £9,000 a year. Carolyn is still contributing £165 a month to a personal pension. But they have no other savings: 'We used any spare money over the years to pay off mortgages and debts. We took the view that we could do better by avoiding paying interest rates than in safe investments.'

The house in France was paid for outright before they sold the business: 'After all fees and disbursements, and buying a new car, we have £140,000 to invest 'on a cautious, low-risk basis because of my age', he says.

We want advice on how to increase our income while maintaining our capital to allow for inflation.'

They want to know whether to invest in France and/or offshore, given the current exchange rate. He asks: 'Do we have any discretion about which regime we are taxed under and, if so, which is the better one?'

Adviser 1: Donna Bradshaw

When the Scotts become resident in France, they
will be liable to the same taxes as French
nationals.

They will have to pay income tax on their UK
income, although a double taxation agreement
between the UK and France means that they will
not be charged twice over.

Personal taxation in France is higher than in the
UK, and the personal allowance is lower, which
means they will start paying tax at modest levels
of income, although this is offset by lower costs of
living.

The French are taxed as household units, so their
incomes are added together and divided by the
number of people in the family.

An offshore investment bond could be suitable for
their capital, denominated in euros to eliminate
currency risk. Although there is a fee, they should
set this up in trust to minimise tax.

Regular withdrawals can be taken from the bond
to provide income; I suggest 5 per cent a year of
the original investment. The bond should be put
in place before they declare themselves tax
resident in France, which they do not have to do
until January 2002.

George should get a forecast of his British state
pension, as it is likely to contribute significantly to
his overall income.

It can be paid gross, directly to a French bank
account.

They will have to pay into the French social fund,
which covers healthcare, until they reach French
state pension age.

Donna Bradshaw works for London-based Fiona
Price & Partners.

Adviser 2: Carolyn Corless

Carolyn will have to stop making pension
contributions once they move, and they should
both consider using capital to fund pension
contributions based on their unused UK tax relief

The ability to carry forward unused relief will be
abolished at the end of this tax year, although the
ability to 'carry back' continues for another year.

They should arrange an offshore account to take
income from pensions and investments. Bristol &
West's Easy Plus Offshore (2) pays 7 per cent gross
on ?10,000. They will need an account in France,
to which money can be transferred from offshore.

The Scotts need to clarify their tax position before
deciding where to invest. Although they want to
be cautious, they should consider equity-based
investments to be sure of keep ing pace with
inflation. They need to prepare for a drop in
pension if George dies first. She would need a
relatively high level of income from the capital,
so investing for growth now is essential. Offshore
unit trusts and investment bonds provide a
balance without undue risk, and a gross overall
yield of about 4 per cent is reasonable.

The French National Health Service works
differently from ours, and the Scotts should check
whether and to what it extent it will cover them.
Otherwise, they should consider health insurance.

They should read the Inland Revenue guide IR20
'Residents and non-residents' and must take
specialist advice when they arrive in France.

Carolyn Corless works for Bideford-based Sully's
Financial Planning.

Advice is for guidance only.

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