Ski Chalet Sell-Off Prompted by French Taxes



A UK-Owned and Managed Chalet in Morzine

 Over the weekend the Sunday Times covered the story of rising French taxes and their impact on the British holiday home market in France. The increased taxes take the form of a new 15.5% social tax on rental incomes and capital gains which is on top of the existing 20% tax on rental income and 19% tax on capital gains. In addition there is a new sales tax, equivalent to our stamp duty, levied at 6% on properties with a sale value of more than €250,000. Most UK-owned holiday homes are either gites in rural areas or ski chalets in the Alps and Pyrenees.

The article covered the one particular ski chalet owner, Alexandra Beeley, under the heading "Time to sell my chalet". Ms. Beeley had bought her chalet in 2009 for €750,000 and it is now worth €800,000. Given the chalet has increased in value Ms. Beeley would be hit by the new taxes.

All in all the article suggests that property taxes could amount to as much as 40.5% of the final selling price (19%+15.5%+6%).

The socialist government of Francois Hollande appears to have viewed the British holiday home owner as a lucrative and popular source of additional taxation. According to the newspaper the new taxes will hit hundreds of thousands of UK citizens who utilise French properties as part holiday home and part small business. Worse it seems, our own HMRC will still get in on the act. As any residual capital gains are liable to 18% UK capital gains tax. Incredibly the 15.5% social tax is not taken into account in any HMRC calculation, so in effect incurring double taxation.

Although the new taxes may bring in revenue in the short term, like Hollande's other socialist policies, it is likely to backfire in the long term. From experience I know some parts of rural France rely heavily on the inward investment of British property investors and the revenue from British holidaymakers. Discouraging British investors will see the jobs created by property conversions dry up. Many ski chalets and gites are the product of these renovation projects.

In recent years a number of smaller British owner companies have set-up specialist catered chalet businesses in France. The ski industry in France is in a precarious state. Costs are rising and the fall in value of the £ versus the € means extras such as ski-passes, ski-school and food and drink are increasingly expensive for the valuable British tourist. Business owners are not going to invest if taxes squeeze all of their potential gains. If British chalet owners follow the lead of Alexandra Beeley, there could be a major exodus of British chalet owners from the Alps and Pyrenees.