If French residents were looking to buy and own a UK property in the past then it would have been exempt from capital gains tax in both countries. This made purchasing a French property less expensive and more financially viable.
A new treaty signed in 2008 in London will come in to fruition in April 2010 to finally counteract this loophole. In the UK this new treaty will cover only income tax, capital gains tax and corporation tax.
In France the new treaty encompasses all taxes, including local authority and social taxes. Also included are the social contributions,as they are considered as a 'wealth' tax in France.
The careful drafting of this new treaty prevents any UK taxpayer arguing that such tax levied amounts are a so called "wealth tax". This tax could then previously be offset against the French wealth tax.
This practice is no longer possible and will effect prices of property in France and the UK. UK companies that sell static French properties will now be liable for capital gains tax in both countries once the treaty is in force.
Under the Miscellaneous rules UK citizens who live in a French property, but have assets outside France will be allowed a 5 year period of being exempt from the wealth taxes. They are still liable for the assets they already have located in France, but will benefit from this relaxation period of non payment.
So French people will now have to pay capital gains tax on property they buy in their own country and in the UK. People in the UK will still have to pay capital gains tax in both countries but have more scope for developing a more permanent location of residence following this treaty. It may take a while for the full details of the treaty to be implemented in both places as the old treaty governing these taxes has been in operation for over 40 years.
The French tax year starts in January while the UK tax year starts in April so there may be a short period where one country still has the old treaty. Once the rules and regulations are in place they may be other issues that arise and consideration has been made for this. Any point not described in the new laws can be clarified and agreed upon by each local authority or state until a decision is reached.