This article is provided for general information only and does not constitute legal, tax or investment advice. Rules change and individual situations differ. Always confirm the current position with a qualified professional before acting.
If you live in the UK and own a let French property through an SCI, the same rent can be taxed twice. France taxes you on your share of the SCI’s profit as it arises. HMRC sees the SCI as a company and taxes what it pays out as a dividend, with no credit for the French tax. On 28 October 2026, the UK government said it intends to fix that, and named French SCIs among the entities it means to cover.
The fix isn’t law yet, and the details are still to be consulted on. Here’s what the government’s response to its consultation actually says, what it could be worth to a typical owner, and the questions it leaves open for French property.
Sources: HM Treasury and HMRC, summary of responses published 28 October 2026, and our worked example below.
Why an SCI gets taxed twice
In France, an SCI that hasn’t opted for corporation tax is transparent for tax. It files an information return, and each associé, or partner, pays income tax and social charges on their share of the profit, whether or not the SCI pays it out. Our guide to SCI or direct ownership explains how that works in practice.
HMRC classifies foreign entities by its own analysis of the foreign law, and its published list of foreign entities treats the French SCI as opaque, like a company. For a UK-resident partner, that usually means UK tax only when the SCI pays money out, charged as a dividend. The UK doesn’t generally give credit for tax paid on the profits a dividend comes out of, so the French tax you’ve already paid on the same income isn’t credited. Tax specialists call this a reverse hybrid: transparent at home, opaque in the UK.
What the government decided on 28 October
The consultation, published on 10 June 2026, centred on US LLCs and proposed making these entities transparent for UK individuals. It drew 64 written responses, and respondents named French SCIs among the entities caught by the same problem. The government has now dropped transparency, which it judged too complex, particularly for capital gains, and chosen a credit instead.
Under the planned approach, legislation would list eligible entities, including US LLCs, US S corporations, Jersey LLCs and French SCIs. They would stay opaque for UK individual members, who would still pay UK income tax on distributions at dividend rates. Each member could then elect to receive credit for eligible foreign taxes they paid personally on the entity’s profits, income and gains. The credit would be worked out on the average rate of foreign tax the investor pays, using mechanical rules, without tracing each distribution back to particular profits.
The government says claims will be possible from early 2028. It will first publish a technical consultation, then legislate in a future Finance Bill. It also says it’s considering practical options for earlier years and for disputes already under way, without committing to any.
What it could mean for one owner
Take a UK-resident higher-rate taxpayer who owns half of an SCI letting a flat in Lyon, with €10,000 a year as their share of the taxable profit. We assume they’re covered by UK social security, have no other French income and have used their UK dividend allowance elsewhere, and we ignore exchange rates. In France, they pay income tax at the 20% non-resident minimum rate and only the 7.5% solidarity levy, so €2,750. If the SCI pays the €10,000 out, HMRC taxes it at the 35.75% higher dividend rate for 2026 to 2027, another €3,575, with no credit today.
| On a €10,000 profit share, paid out | Today | Credit for French income tax only | Credit for income tax and the 7.5% levy |
|---|---|---|---|
| French tax | €2,750 | €2,750 | €2,750 |
| UK tax after any credit | €3,575 | €1,575 | €825 |
| Total | €6,325 | €4,325 | €3,575 |
| Effective rate | 63.3% | 43.3% | 35.8% |
The last two columns show why the detail matters. The response says US federal, state and local taxes would qualify, but it doesn’t say whether French social levies would count as eligible foreign taxes. For an owner covered by UK social security, that’s the 7.5% levy, worth €750 a year in this example. If you’re not covered by UK, EEA or Swiss social security, French social charges on rent are 17.2%, so the question matters even more.
Three questions for French property owners
What happens when the SCI sells?
When an SCI taxed under income tax sells, the partners pay the French tax on the gain personally, as our guide to capital gains tax for non-residents explains. How the UK then taxes the money depends on how it comes out of the SCI, as a distribution or through a winding-up, and that needs UK advice before the sale. The response describes the new credit as covering foreign tax on the entity’s gains as well as its profits and income, which suggests sale proceeds are meant to be in scope. How it would work on a sale is for the technical consultation.
What about a family holiday home?
An SCI that holds a home the family uses, with no rent, has little French income to tax, so the double tax on rent doesn’t arise. HMRC’s own employment income manual uses the SCI as its example of a home abroad owned through a company. A 2008 exemption removes the benefit-in-kind charge that could otherwise apply to the people who run such a company and use its home, provided its conditions are met. The manual also notes the exemption has no effect on the other UK tax consequences of owning a home through a company.
What if you’ve filed as if the SCI were transparent?
The June consultation describes members of US LLCs who report the LLC’s income as their own, relying on Anson, a 2015 Supreme Court ruling about a Delaware LLC. It explains that HMRC’s guidance doesn’t accept that ruling as a general rule for US LLCs, and that taxpayers who apply it risk a dispute over whether their own facts match. Respondents asked for these positions and open enquiries to be dealt with, and the government says only that it’s considering options for prior periods. If you’ve reported SCI income on a similar basis, keep your adviser in the loop as the technical consultation appears.
What to do now
Don’t restructure on the strength of an announcement. The credit isn’t law, and the rules for earlier years are undecided.
Keep the paper trail. Your French tax notices and your share of the SCI’s annual return show the French tax you paid personally, which is what a credit would be based on.
Ask your UK adviser about timing. UK tax arises when the SCI pays out, so when it does may matter once the rules are known.
Have your say. HMRC invites anyone who wants to join its engagement sessions to write to entityclassificationmailbox@hmrc.gov.uk, and the technical consultation is due shortly.
Our view
For British owners who chose an SCI for French inheritance planning, seeing it named in a UK government document is a real step. The credit route is simpler than the transparency the consultation first proposed, and it leaves existing structures alone. Its value for French property will turn on three points the technical consultation has to settle: whether French social levies count, how a sale is handled, and what happens to the years of double tax already paid.
Readers, do you hold a French property through an SCI while living in the UK, and has HMRC ever taxed a distribution from it? Did anyone warn you about the mismatch when the SCI was set up? Would you respond to the technical consultation if it asks about French social levies?
FAQ: French SCIs and UK double taxation
Does HMRC treat a French SCI as transparent?
No. HMRC’s published list of foreign entities treats the French SCI as opaque, so a UK-resident partner is generally taxed on distributions as dividends, while France taxes the partner on their share of the profit.
What did the UK government announce on 28 October 2026?
It said it is minded to introduce an elective credit for UK-resident individuals in entities such as French SCIs and US LLCs, based on the average rate of foreign tax they pay personally. A technical consultation comes first, then legislation, with claims possible from early 2028.
Will the new credit cover past years?
Not decided. The government says it is considering practical options for prior periods and ongoing disputes, without committing to any.
