In a short notice all the 200,000 British expats who are residing in France will have to inform the Paris tax office of any inheritance trusts that they are named in or they have set up for relatives in the UK including basic life insurance policies put into trust to avoid paying inheritance tax.
If they are unable to furnish the required details by coming Friday they are in line for a €10,000 fine.
Those who are only having holiday homes in France will not be affected by the ruling unless they have also put the property inside a trust or hold French assets in a trust.
Overseas advisers have told of the chaos and confusion among many expats who were still not aware about such fine amid the change in France’s new government and the lack of clarity over the penalty.
One of the financial adviser firm in Paris has said that the French authorities were absolutely gunning for British expats. It was a real mess with fear spreading in the confusion because the penalties were big money.
Another financial adviser from Deloitte accountancy said that the whole fracas was due to poor understanding by French authorities.
She said that Trusts were an Anglo-Saxon concept and the French had little understanding of it which have recognised yet. Declaring them to the authorities was a burdensome affair.
Several of the expats would not even be aware that they have to alert the French taxman since, as a beneficiary, it’s not usual to even think of any future payouts as part of your wealth. The penalty even applies to tiny trusts worth £1,000 or less.
For those with trusts worth £200,000 or more, there will be an even bigger penalty hit, the larger of €10,000 or a five per cent charge. It means expats with a hard-earned £500,000 tied up in property and investments in the UK will be forced to cough up £25,000 if they fail to alert the taxman in time.
There is also growing concern that pensions transferred to France will be caught in the trap. To avoid the fine, British expats in France must urgently speak to their trust companies.
Those who do beat the deadline will still have to pay a tax bill, of between 0.25per cent and 0.50 per cent, if their total wealth exceeds €1.3m (£1.05m).
The charges only apply after five years of full residency. Those who ignore the law risk being branded criminals and could result in imprisonment.