Many of us are still trying to work out how the new budget for 2014 unveiled by the Chancellor, George Osborne will benefit us in the years to come. Sextant French Properties have made it easy with a series of guides explaining how you can make educated and guaranteed returns on investment properties.
From April 2015, savers will be given complete freedom to withdraw all their pension money once they reach 55. In the interim, temporary measures have been put in place to take the pressure off those seeking a retirement income. Particular beneficiaries of this new budget are savvy savers over 50 who now have the chance to keep more of their hard-earned money and to make excellent returns on investments. It is now even easier to purchase French leaseback properties. Previously, pension fund withdrawals over £7,080 incurred hefty 55% tax charges, but new measures introduced on 27th March have alleviated such charges substantially. As of next April, savers will be able to access the entirety of their pension at any time after age 55; 25% of this sum is completely tax-free and the rest is subject to income tax at marginal rates. This money could subsequently be spent or invested as desired.
How can I make the most of these changes?
One of the best ways to profit from these changes to pensions is through a SIPP, or a Self-Invested Personal Pension. This is a highly tax-efficient personal pension comprised of investments you choose yourself. SIPPs are designed for people who want freedom and flexibility with their pension fund. As commercial properties, French leaseback schemes work seamlessly as part of a pension investment portfolio; they are safe, stable, long-term investments.
Furthermore, any payment you make into your SIPP is boosted by basic rate tax relief from the government – those paying higher rate taxes are able to claim as much as 40 % tax relief. In real terms, this means that you pay less for your property; for example, a high rate tax payer wishing to invest £100,000 would only pay £60,000. Additionally, any income generated by your SIPP is tax-free, meaning that any rental income you earn through your leaseback is also tax-free.
How does the French leaseback scheme work?
Very simply, you purchase a freehold furnished property then lease it back to a management company initially for 9-11 years. Leaseback schemes were introduced over 20 years ago by the French government with properties well located to cater for the tourist market. Mortgages are widely available and even smaller than those needed for traditional freehold properties.
The leaseback scheme offers several tax incentives, including:
- a 20% VAT rebate on the price of the property, paid to the property owner upon completion
- capital gains tax decreasing from ownership year 5 to 30
- minimal tax on any rental income in France (0% the first 23 years)
- guaranteed net rental income between 3 to 6% of the property price .
In addition to tax incentives there are several other benefits which supplement the attraction of such properties. For instance, in most leaseback arrangements, the owner is entitled to a few weeks of personal occupancy. Other owners may choose to maximise their rental yield by not including any personal occupancy in the lease agreement; however, very often these clients can enjoy an exclusive owners-only discount of up to 70% on their stay in the residence during medium to low seasons.
Effectively, you will have a property that will make you money without the normal hassle associated with rental properties. The management company takes care of everything: finding tenants, cleaning, maintenance, insurance etc. You are free to enjoy the ownership of a well-located property, with excellent facilities, which is likely to increase in value and offer year-on-year cumulative rental income.
What leaseback properties should I invest in?
Sextant Properties has a large variety of leaseback properties, enabling clients to choose the right home for you depending on your needs.
1) The Villages Nature development is ideally located in the heart of the Paris Ile-de-France region. The development provides unprecedented potential to attract large numbers of tourists from all over the world. Villages Nature will offer upscale 1-3 bedroom apartments and a wide variety of relaxation and leisure activities in a high quality natural setting. Its location makes it the ideal starting point to visit Disneyland® Paris, as well as the tourist attractions and cultural treasures of Paris and the Seine-et-Marne department.
Ref: 51240 Price: from €220,000 to €440,000 Yield: 4% net return (net of all charges)
If you prefer a picturesque Alpine setting, the prestigious Terrasses d’Helios residence in Flaine offers stylish 1-3 bedroom apartments in traditional chalets, and comes with a pool and spa, with direct access to the slopes and the Grand Massif ski resort. This residence has been designed in keeping with traditional Alpine architecture. The apartments feature contemporary furnishings in natural shades with subtle patterns and tasteful decor. Each apartment comes with a fitted kitchen area, plenty of storage space and natural light, free WIFI and satellite TV and a balcony or patio. There are a number of flexible occupancy options.
Ref: 35351 Price: from €260,000 to €446,000 Yield: 4% net return (net of all charges)
Both developments are managed by Pierre et Vacances, one of the largest and most established companies on the market and offering great owner benefits. For instance, if you choose to take personal occupancy with your lease, you can exchange this for visits to other Pierre et Vacances resorts all over France.
If you would like any more information on your investments with the French Leaseback Scheme, go online at www.sextantproperties.com