Owning a family business with assets in both France and the United Kingdom creates significant legal and tax complexity at the time of succession.
Two different legal systems apply.
Two separate tax regimes may be involved.
Family balance and business continuity must also be protected.
Careful estate planning France UK is therefore essential to understand the applicable rules and reduce uncertainty.
This article provides general legal information only and does not constitute individual advice.
Why Cross-Border Succession Is More Complex
A family business succession France UK typically raises several questions:
- Which law governs the estate?
- Who is entitled to inherit, and in what proportions?
- Which country can tax the estate?
- Can the same assets be taxed twice?
- How can business continuity be preserved?
These issues arise because succession involves both civil law rules (who inherits) and tax law rules (how much tax is due), and these differ substantially between France and the UK.
Key Legal Differences: France vs. United Kingdom
France: Forced Heirship Rules
French succession law is based on the principle of forced heirship (réserve héréditaire).
A fixed portion of the estate must pass to certain heirs, primarily children.
This mandatory share cannot be freely disposed of by will.
As a result, the freedom to allocate shares in a family company may be limited if children or other protected heirs exist.
In practical terms, French law prioritises family protection over testamentary freedom.
United Kingdom: Testamentary Freedom
By contrast, English law generally follows the principle of testamentary freedom.
A person may distribute their assets as they wish through a will.
However, certain dependants may apply to court if reasonable financial provision has not been made.
The UK approach offers more flexibility in structuring business succession but may create uncertainty if expectations within the family differ.
Tax Considerations: France and the UK
Tax exposure is often the most sensitive element in family business succession France UK.
In France: Inheritance and Gift Tax
French inheritance tax can be substantial, particularly outside the immediate family line.
However, specific relief mechanisms exist for business transfers, notably the Dutreil regime (commonly referred to as the “Dutreil pact”).
Under strict conditions, this regime allows partial exemption of the value of qualifying business shares.
Conditions typically include:
- Minimum holding periods
- Ongoing operational activity
- Collective and individual commitments
- Management obligations in certain cases
Failure to comply may result in the loss of the tax benefit.
In the UK: Inheritance Tax (IHT)
In the United Kingdom, Inheritance Tax (IHT) may apply at rates of up to 40% on the taxable estate.
However, reliefs may be available for qualifying business property.
These reliefs can significantly reduce the taxable value of business assets.
Eligibility depends on factors such as:
- The nature of the business
- The ownership structure
- The tax status of the deceased
Each situation requires careful factual analysis.
Which Law Applies to the Estate?
For many individuals with links to EU Member States, the EU Succession Regulation (Brussels IV) allows, under certain conditions, a person to choose the law governing their estate.
Typically, a person may elect the law of their nationality in a will.
This choice can have important consequences, particularly in relation to:
- Forced heirship rules
- Allocation of shares
- Validity of testamentary arrangements
However, the choice of law does not automatically eliminate tax exposure in either jurisdiction.
Structuring the Transfer of a Family Business
Effective estate planning France UK often involves more than drafting a will.
It may require structuring ownership and governance in advance.
Family Holding Companies
A family holding company can centralise ownership of business assets across jurisdictions.
Potential advantages include:
- Clearer governance
- Easier share transfers
- Improved coordination between heirs
Cross-border corporate structuring must take into account both French and UK company law and tax rules.
Usufruct and Bare Ownership (Dismemberment)
Under French law, ownership can be divided between:
- Usufruct (right to use and receive income)
- Bare ownership (ultimate ownership)
This technique may allow gradual transmission while retaining certain economic rights.
Its cross-border consequences must be carefully considered when UK assets are involved.
Lifetime Transfers and Family Agreements
Lifetime transfers, including structured gifts, may help anticipate succession and reduce uncertainty.
In addition, governance tools such as:
- Shareholders’ agreements
- Family charters
- Adapted articles of association
may contribute to business continuity after succession.
Risk of Double Taxation
One of the main concerns in double taxation inheritance France UK scenarios is the potential for the same estate to be taxed in both countries.
There is no comprehensive inheritance tax treaty covering all succession situations between France and the UK.
Tax liability may depend on:
- Location of assets
- Residence or domicile status
- Domestic tax rules in each country
Domestic relief mechanisms may, in certain cases, reduce double taxation.
However, the outcome depends on the specific facts.
Governance and Business Continuity
Tax efficiency alone does not guarantee a successful succession.
If ownership becomes divided among multiple heirs, governance challenges may arise.
Planning ahead may involve:
- Clarifying management roles
- Defining voting rights
- Establishing dispute resolution mechanisms
- Aligning shareholder expectations
Without preparation, family disputes may affect operational stability or company value.
Conclusion
A family business succession France UK requires a coordinated legal and tax approach.
Differences between French forced heirship rules and UK testamentary freedom, combined with distinct inheritance tax regimes, create a complex framework.
Anticipating applicable law, understanding tax exposure, structuring ownership, and planning governance are central elements of a secure transition.
Given the cross-border nature of such estates, a structured and jurisdiction-aware strategy is often essential to reduce uncertainty and preserve business continuity.
