For a British family buying a furnished holiday property in Morzine, the ownership structure can make a material difference to annual rental tax, family succession and the eventual capital-gains bill. The three principal options are direct personal ownership, a SARL de famille taxed under the French income-tax regime, or a SARL subject to French corporation tax.
For many families intending to retain and genuinely rent the property over the long term, a SARL de famille can be an excellent solution. It is not, however, an automatic tax winner for owners who remain UK tax resident. France and the UK may view the company differently, and depreciation that reduces French rental profit during ownership can now increase the French taxable gain on sale.
In this article, “British buyer” means someone who is UK tax resident. Nationality by itself does not determine the tax result.
What is a SARL de famille?
A SARL is a French limited company. Where all shareholders belong to the qualifying family group, the company can elect for the special SARL de famille regime. The permitted group can include spouses, qualifying civil partners, parents, children, grandparents, grandchildren and siblings.
The family owns shares in the company rather than owning the apartment directly. The company then purchases and operates the furnished holiday property. A qualifying SARL de famille can elect to be taxed under the French personal income-tax regime, normally described as being taxed “at IR”. French tax guidance sets out the family-company election and qualifying relationships.
The IR election is the central feature. A SARL taxed under French corporation tax, or “at IS”, produces a very different annual and exit calculation.
Why a SARL de famille at IR can be attractive
A furnished rental operated through a SARL de famille at IR can normally use the French furnished-letting accounting rules. Subject to the facts and the accountant’s treatment, the business may deduct rental management, insurance, maintenance, local property taxes, accountancy costs, qualifying repairs and depreciation of the building, furniture and equipment.
Depreciation is a non-cash accounting expense. An apartment could, for example, produce €20,000 after management charges and property expenses while depreciation reduces the French taxable rental result to a much smaller figure or sometimes nil.
This can make the structure particularly useful where the family intends to retain rental cash in the business, reinvest in the apartment or repay genuine funds previously advanced to the company through properly documented shareholder loans.
The family and succession advantages
The value of a SARL de famille is not limited to the annual tax calculation. Its articles and shareholder arrangements can establish who controls important decisions, how costs and income are divided, what happens when a family member dies and how shares can be transferred to the next generation.
Transferring shares can sometimes be more manageable than repeatedly transferring fractions of the apartment itself. French gift, inheritance and valuation rules still apply, so the notaire should design the ownership and succession plan before the purchase—not after it.
Shareholder loans can also be helpful. Repayment of genuine loan principal is commercially different from paying a dividend, although the loan, interest if any, repayments and accounting entries must all be properly documented.
The important UK tax mismatch
France and HMRC do not necessarily classify a SARL de famille in the same way. France generally looks through a SARL de famille at IR and taxes the shareholders on their share of the furnished-letting result. HMRC normally regards a French SARL as an opaque entity—a company legally separate from its shareholders. HMRC’s entity-classification list records the standard UK treatment of a French SARL.
This mismatch means a British family should not assume that French depreciation also removes the UK tax exposure. Depending on the company’s ownership, management, funding and purpose, the UK’s Transfer of Assets Abroad rules and related provisions may attribute foreign income to UK-resident individuals even where the cash has not been distributed.
In other circumstances, UK tax may arise when the SARL distributes income or is eventually liquidated. A repayment of genuine shareholder-loan principal may not be an ordinary dividend, but it does not automatically switch off the UK anti-avoidance rules.
The correct description is therefore that a SARL de famille can be a strong ownership and succession structure. It should not be presented as a guaranteed UK income-tax shelter.
What about family holidays in the apartment?
Personal occupation does not necessarily prevent the structure from being suitable, but family use must be documented and reflected correctly in the French accounts. Advisers should establish how many weeks will be commercially rented, which weeks will be reserved for the owners, whether an accounting adjustment or rent is required for private stays and how expenses and depreciation should be apportioned.
The family should also check whether turnover and services create French social-contribution, VAT or registration obligations. A property that is genuinely marketed and rented commercially is easier to support as a furnished-rental business than a private second home rented only occasionally.
The capital-gains change that buyers must model
For relevant disposals from 16 February 2025, depreciation deducted under the French non-professional furnished-letting regime generally reduces the acquisition cost used to calculate the French capital gain. In practical terms, depreciation that helped reduce annual French rental tax is brought back into the calculation when the property is sold. The French tax authority’s furnished-letting guidance explains the current treatment.
Consider a deliberately simplified example:
| Illustrative calculation | Amount |
|---|---|
| Original purchase price | €583,000 |
| Sale price after ten years | €750,000 |
| Ordinary increase in value | €167,000 |
| Depreciation deducted during ownership | €200,000 |
| French gain before allowances and eligible costs | €367,000 |
Without the depreciation adjustment, the starting gain would have been €167,000. Once €200,000 of deducted depreciation reduces the acquisition basis, it becomes €367,000 before eligible purchase costs, qualifying improvement expenditure, selling costs and holding-period allowances.
Depreciation can still provide a valuable annual cash-flow advantage. The important change is that it should now be understood mainly as tax deferral rather than a permanent exemption.
French capital-gains tax under the IR regime
Where the owners remain non-professional furnished landlords and the required conditions are met, the sale should broadly fall within the French private-property capital-gains regime.
The principal charges for a qualifying UK resident are normally French capital-gains tax at 19%, a 7.5% solidarity levy where the owner is properly affiliated to the UK social-security system, and a possible additional surcharge on larger taxable gains.
Holding-period allowances progressively reduce the taxable gain. The 19% capital-gains-tax element is fully exempt after 22 years, while the social element is fully exempt after 30 years. France’s official property-gain guidance explains the rates and holding-period relief. The separate non-resident guidance covers the social-charge treatment.
How the UK approaches the sale
A UK resident must also report relevant overseas property or foreign-company gains to HMRC. The UK calculation is made in sterling: acquisition costs are converted at the exchange rate applying when incurred, while sale proceeds are converted at the disposal-date rate. Currency movements can therefore produce a UK gain that differs materially from the French calculation.
Higher-rate taxpayers will generally fall within the 24% UK capital-gains-tax rate for residential-property gains, subject to the taxpayer’s circumstances, deductions and available annual exempt amount. France normally has the primary taxing right over French real estate, and the UK may give credit for qualifying French tax paid on the same gain, limited to the corresponding UK liability. GOV.UK’s overseas-property guidance provides the starting point.
French tax may exceed the UK liability, particularly where the French calculation includes previously deducted depreciation. There may then be no additional UK tax on the same gain, but the UK does not refund excess French tax.
A SARL adds another layer. HMRC may consider whether the gain of the non-UK company should be attributed to UK-resident shareholders under the rules for certain non-resident close companies. HMRC’s guidance on attributed gains outlines this area. If the gain is not attributed at the time of sale, UK tax may instead arise when proceeds are distributed, shares are disposed of or the SARL is liquidated. A difference between the French and UK taxable events can make foreign-tax-credit matching more difficult.
Why a SARL at IS is usually less attractive on exit
An ordinary SARL subject to French corporation tax can also depreciate the property, but its eventual sale is normally measured against the depreciated net book value. That can create a large corporate gain.
The company does not receive the private-property exemptions after 22 and 30 years. It pays corporation tax on its result, and the family may then face a second tax charge when the remaining proceeds are distributed or the company is liquidated.
For a family holiday property expected to appreciate and eventually be sold, a SARL at IS is therefore normally the least attractive of the three principal choices. Preserving a valid SARL de famille IR election can be critical.
Which structure is likely to be best?
1. SARL de famille at IR
Potentially excellent for long-term shared ownership, succession planning and reinvestment. It is particularly interesting where the apartment is genuinely rented and the purchase is partly funded through properly documented shareholder loans.
The UK entity-classification and anti-avoidance position must be reviewed in writing before the purchase.
2. Direct personal ownership
Normally the clearest option where simplicity, regular personal income and an uncomplicated eventual sale are the priorities. It may be preferable for a property intended principally for family holidays with only occasional rental activity.
3. SARL subject to corporation tax
Usually the least attractive option for a long-term family property expected to increase in value, because depreciation can produce a much larger taxable corporate gain and a further tax charge may arise when the money is extracted.
The essential warning
A SARL de famille can defer French tax through depreciation, but it does not necessarily eliminate annual UK tax. Depreciation can also substantially increase the French taxable gain when the property is eventually sold.
The right structure depends on how the apartment will be used, how long it will be retained, whether the owners need to withdraw the rental income personally and how the family expects ownership to pass to the next generation.
Before signing a purchase contract, buyers should obtain coordinated advice from a French accountant or notaire and a UK adviser experienced in foreign companies. The written review should cover annual rental income, private use, shareholder loans, UK anti-avoidance legislation, capital gains, succession and foreign-tax-credit relief.
Domosno can help British buyers identify suitable Morzine properties and organise the practical ownership questions to raise with their professional advisers. Contact Domosno to discuss your French Alps property search.
This article provides general information rather than individual tax or legal advice. Rates and legislation may change, and every family’s tax residence, ownership, funding and usage arrangements must be considered separately.
