Substantial errors have been made by many French tax offices in the assessment of social charges on foreign pensions and rents.

That at least seems to be the conclusion from the reports we have received from readers and from those coming from elsewhere.

Mervyn Simms of French financial advisors Siddalls reports that ''We have been getting a lot of client queries on this issue and in the vast majority of cases the social charges are being incorrectly applied''.

Much of the mess has come about due to a change in the tax collection arrangements, with responsibility for the collection of the prélèvements sociaux on foreign revenues having been passed from 'URSSAF', the social security collections agency, to the local tax offices.

We foreshadowed in June that this could well cause problems, when we published an article on the new arrangements in our Newsletter.

As a result of the transfer of responsibility some early retirees are facing a higher bill for social charges this year, as tax offices have now caught up with those who were not previously being assessed on their pension income.

However, many early retirees are actually not liable for the charges on their pensions due to the exemption provisions that are in place, and those of pensionable age are all exempt on their pension income.

The legal position is a complicated one, but broadly speaking, although all pension income is ordinarily liable to social charges at the rate of 7.1% (6.6% CSG and 0.5% CRDS), certain groups of persons are exempt.

The main exemptions are:

• Those who hold an 'E' or S1 health certificate;
  
• Government service pensions;
  
• Those with a private health insurance policy;
  

• There is also a reduced or nil rate for those on a low income.

Some tax offices seemed to have either ignored or been unaware of the rules, as a result of which many of you have received a large unexpected tax bill.

The problem is a familiar one, except that this year the scale of the confusion appears to be greater, due, in part at least, to the transfer of responsibility for the collection of Contribution Sociale Généralisée (CSG) social charges on early retiree pensions to the tax offices.

Those of pensionable age have been caught up on the chaos, as a large number of you are reporting that even though you have previously been exempt on the basis of your E121, this year your pension income has been tasked.

The same also appears to have occurred for many of you on long term Incapacity Benefit, where the E121 should also grant you relief from social charges on your pension income.

In other cases we are hearing that some tax offices are refusing to recognise the former 'E' forms and are demanding the new 'S' form.

As the E121 forms for those of pensionable age are of unlimited duration it seems the International Pensions Centre in Newcastle has been unwilling to issue new S1 certicates, arguing that they cannot be responsible for the 'incompetence' of French tax offices.

Accordingly, if you do not hold a copy of your 'E' or 'S' form, you need to contact your local CPAM, who should be able to provide you with a copy.

If the tax office refuse to acknowledge your exempt status then you should appeal to the local tax ombudsman for your department, called the Conciliateur Fiscal.

Our guide to Social Security Contributions in France provides more information on the law, including extracts from relevant French regulations.

Rental Income

Some of you are also reporting high social charges on rental income. Here the rules are different.

Social charges are always payable on such income and at the higher rate of 13.5% (15.5% for 2012 income), with no exempted groups or reduced rates. The charge is on the net income, after deductible costs and allowances.

Nevertheless, only domestic rents are liable for these charges, for rental income from the UK is taxable in the UK, with elimination of double taxation in France applied through a tax credit (crédit d’impôt).

Once again, however, it is clear that the computation of this credit has not always been carried out correctly by the tax offices, as a number of you have reported to us that the social charges have been applied on your UK rental income.

According to Mervyn Simms, ''There should be a nil social charges payable on UK rental income (or other income solely taxed in the UK), as the tax credit for social charges on this type of income is always 100%''.