Tax is a strategic lever for any company looking to establish, expand or invest on either side of the Channel. This English‑language overview explains:
- the corporate tax regimes in France and the United Kingdom;
- lawful avenues for tax optimisation and the associated risk zones;
- the lasting impact of Brexit on cross‑border flows.
Key objective: secure compliance, reduce tax burden and safeguard competitiveness in a post‑Brexit regulatory environment.
1. Applicable Corporate Tax Regimes
1.1 France: Corporate Income Tax (CIT)
- Standard rate: 25 % for fiscal years beginning on or after 1 January 2022 (Article 219 of the French Tax Code).
- Reduced SME rate: 15 % on the first €42 500 of profit (conditions: turnover < €10 million, fully‑paid capital held ≥ 75 % by individuals).
- Preferential schemes:
- Parent‑Subsidiary regime (EU Directive 2011/96 transposed, 95 % exemption on dividends).
- Tax consolidation (Article 223 A) neutralising intra‑group results.
- Research Tax Credit (CIR): 30 % of qualifying R&D expenditure up to €100 million.
- Compliance duties: annual tax bundle (Form 2065), VAT returns (CA3/CA12), DAC6 reporting for cross‑border arrangements.
1.2 United Kingdom: Corporation Tax
- Main rate: 25 % from 1 April 2023 on profits above £250 000.
- Small Profits Rate: 19 % on profits up to £50 000; Marginal Relief on the band in between.
- Incentives:
- Patent Box: effective rate ≈ 10 % on eligible IP income.
- R&D Tax Relief: additional deduction of 20 %–34 % depending on scheme (SME or RDEC).
- Compliance: CT600 filing, statutory accounts with Companies House, Master File + Local File transfer‑pricing documentation for groups with turnover ≥ £750 million.
1.3 Comparison & Red Flags
| Criterion | France | United Kingdom |
|---|---|---|
| Complexity | High, formalistic | Procedurally lighter |
| Audit culture | Frequent tax audits | Cooperative approach with HMRC |
| Incentives | CIR, innovative start‑ups | Patent Box, Super‑Deduction (2021‑23) |
| Main risk | Reassessments and penalties (10 %‑80 %) | Failure to Notify, interest surcharges |
Best practice: map subsidiaries and flows to choose the most efficient blend of Parent‑Subsidiary or Patent Box rules before any reorganisation.
2. Tax Planning: Acceptable Practice vs. Abuse
2.1 What Is Permitted
- Leveraging preferential regimes (parent‑subsidiary, tax consolidation, Patent Box, R&D credits).
- Structuring intra‑group flows (services, royalties, management fees) under the arm’s‑length principle (OECD TP Guidelines 2022).
- Selecting the legal form (Ltd, SAS, SA) and tax residence in line with genuine substance (head‑office, C‑suite, key functions).
- Applying the France‑UK double‑tax treaty (2008, amended 2018) to eliminate double taxation.
2.2 What Crosses the Line
- Treaty shopping or artificial arrangements without economic substance (Abuse of Law, French LPF Art. L 64 / UK GAAR).
- Profit shifting to tax havens lacking justification (French Art. 57 / UK CTA 2010).
- Failure to disclose cross‑border schemes under DAC6 / MDR.
- False invoicing or missing transfer‑pricing documentation: risk of criminal sanctions and penalties up to 100 % (France) / fines up to £100 000 (UK).
Takeaway: with CRS/FATCA automatic exchange, tax authorities cross‑match banking data. Robust documentation is your first line of defence.
3. Brexit Tax Impact
3.1 End of EU Directives
- Loss of Parent‑Subsidiary and Interest & Royalties exemptions: potential withholding taxes (12.8 % on FR dividends to UK; 0 % UK dividends to FR subject to treaty conditions).
- Merger Directive no longer applies: cross‑border mergers now require pre‑approval (Art. 210 B) and may trigger latent gains.
3.2 Customs & VAT Tightening
- Import VAT payable on entry into the EU; possible deferment via a UK VAT account (reverse charge).
- Mandatory customs formalities (EORI number, CDS declarations) with potential logistics delays.
3.3 New Opportunities
- UK Freeports: customs duty relief and reduced National Insurance.
- HMRC rulings increasingly flexible to attract European head offices post‑Brexit.
Post‑Brexit checklist: review withholding exposures, refresh transfer‑pricing files, adapt supply chains (Incoterms, warehousing).
4. Safeguarding Your Tax Strategy
- Regulatory due diligence prior to any cross‑border set‑up or M&A.
- OECD‑compliant transfer‑pricing documentation updated annually and in English.
- Annual tax reviews to spot GAAR/POTAS (UK) or DAC6 triggers early.
- Rulings & Advance Pricing Agreements (APAs) to secure major intra‑group flows.
5. Tailored France‑UK Tax Support
Our bilingual law firm supports:
- Start‑ups & SMEs: choice of structure, CIT rebate, R&D credits, fundraising.
- International groups: holding optimisation, cash‑pooling, intra‑group financing.
- Investors: fund structuring, due diligence, tax litigation.
Contact us for a bespoke assessment of your tax exposure and a secure roadmap.
Disclaimer
The information above is provided as general guidance and does not constitute exhaustive legal advice. Always seek tailored advice from a qualified professional.
