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.

High Vehicle Costs and Petrol Allowances

The HMRC allows 40p per mile for travel costs when using a car for business purposes. The rate of 40p per mile was set in 2002 when a litre of unleaded cost an average of 77.9p. Today the average cost of a litre is around £1.30, representing a rise of 68%. The rise in vehicle costs without a commensurate rise in travel allowances means the role of vehicle tracking systems becomes ever more crucial. Every additional and unnecessary mile driven adds unnecessary costs.

I use my own car for business trips. Tomorrow I am to make a business trip of around 264 miles. My mileage allowance will be £105.60. Back in 2002, at 33 miles per gallon my petrol costs would have been £28.29, leaving £77.31 to cover both the variable costs and a contribution towards the shared fixed costs of car ownersip. Tomorrow my petrol costs will be £47.22, leaving just £58.38 towards other costs. Even if all other costs had stayed the same since 2002, I am left with a 24.5% shortfall. I am probably, therefore subsidising my employer.

A quic estimate of the true costs of the trip - based on its share of my annual mileage - indicates a fairer mileage contribution would be nearer 65p per mile. I drive about 9,000 business miles per year and further 4,000 miles on private mileage. At current mileage rates and petrol costs it would appear that I am subsidising my business to the tune of £2,250 per annum. The daft thing is, if my business was to compensate me for these increased costs I would need to pay tax on them as a benefit. If the HMRC fails to raise mileage rates I foresee increase demands to bring back company vehicles.

Don't Pay for HMRC Tax Errors

UK workers are being told by financial experts that they have a legal right to avoid HMRC tax repayment demands.

The HMRC has made a huge number of errors in calculating the tax owed in previous years. Up to 5.7 million PAYE (pay as you earn) taxpayers are affected. About 4.3 million people have paid too much tax and will expect a rebate in their pay packets. A further 1.4 million have paid too little. It is this latter group who can expect a demand.

Essentially under a tax loophole it seems that if people have provided the correct information and the HMRC have made the wrong calculations and taken too little tax, the tax payer can ask to have any underpaid tax set aside.

HMRC Wrongly Fines Taxpayers

Britain's tax office, the HMRC, have wrongly fined 20,000 taxpayers for late submission of their 2007-8 tax returns.

UK taxpayers are fined £100 for failing to submit their returns by midnight on 31st January. Due to complaints from professional accountants the HMRC have admitted they have made mistakes. Indeed I am one of the victims. The problem I suspect is that the HMRC's computer systems cannot cope with requirement for taxpayers to make their submission online.

In my own case I tried to submit my return on the evening of 3oth January only to find the system rejected the password the HMRC had supplied me with. The following day an HMRC helpdesk operative got me to try using various browsers and computers without success. As a result of the systems failure I was given an extension. It took more than a week - until 12th February - before the HMRC could confirm that my return had been received.

Shockingly, 3 weeks later I received a letter informing me of my fine for late submission. The HMRC letter was dated 2 weeks prior to my receipt of it. I wrote back next day but have today (12th March 2009) received another letter (dated 5th March 2009) charging me with interest.

My only hope is that the revelation that thousands of taxpayers have been wrongly fined will lead to some form of amnesty.

Government Spending on IT Soars

The incompetence of the UK public sector knows no bounds. As the weather forces the UK public sector to close down - whilst the private sector struggles on - The Times reports that the current overspend on government IT projects amounts to more than £18 billion.

Many IT projects - such as the NHS CRM system - are years behind schedule and are so mired in problems that there is little prospect that they will ever be completed. The NHS project is 4 years behind. Another project to manage the dsicredited tax credit system for the HMRC was orginally budgeted at £2.9 billion. Current estimates are that this will now cost £8.5 billion.

Only in the overpaid, over-pensioned, underworked, poorly managed, bloated public sector would such incompetence be allowed to continue. So much for the famous Prince2 project management system.