# Canadian Moving to UK



## mike_302

I have a rather complex scenario that I will have to be investigating, but which could benefit from some input from people who are familiar with the case of moving to the UK:

I am moving to the UK in 2016. Let's say I will be there for 5-15 years, working.
Tax laws are such that I pay any tax over and above the UK tax, back to Canada.
The first 9K pounds ($18K Canadian) is tax exempt (a little under half my potential annual salary), the rest is taxed at 20%. In Canadian dollars though, I would owe 15% tax for the $11K-$18K portion. After that, the UK tax is higher (20% vs Canada's 15%) so I presume I would not owe Canada more than 15% on the difference between $11K CAD and 9K pounds?

So if I keep "substantial financial ties with Canada", then I have to do some relatively simple maths on these tax differences --- fair...

But what about my financial holdings in Canada? Let's say I have a TFSA (which has ETF and stock holdings), and some ETF's outside that TFSA which are there long term (not being bought and sold). Does the UK care about these holdings? Would the TFSA gains/losses have to be reported in the UK?

I could of course cut substantial financial ties with Canada too --- move everything to the UK and save myself the Canadian taxation... Would I have equivalently beneficial tools like the Canadian TFSA and RRSP?

There are clearly a lot of interesting questions here, and surely this isn't the first time these questions have had to be asked. So I look forward to any insight readers can provide, and perhaps I will follow up in a year, with a useful blog post detailing all of this!

Thanks


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## Robillard

Hello mike_302,

Whether you claim tax residency in Canada or the UK, this is generally a factual point. You may not have an option on this. There is a tax treaty between Canada and the UK that has a tiebreaker rule in case there is any dispute over who has tax jurisdiction. In general, your income is first taxed at source, and then may be subject to additional tax in the jurisdiction where you claim residency, if the tax rate there is higher. 

I would generally recommend that you get professional help in respect of your international tax compliance. In general though, assuming that you can continue to claim tax residency in Canada, it is my understanding that first you would pay UK tax on your labour income, and you would pay UK withholding tax on any UK-source investment income. Then you would file a Canadian tax return and calculate your Canadian tax liability then claim foreign tax credits for all the UK tax paid. The foreign tax credits are creditable against your Canadian tax liability, but are not refundable. 

If you can continue to claim Canadian tax residency, then you will still have access to Canadian tax incentive programs, such as the RRSP and TFSA, and you can continue to contribute to these. 

If you sever your Canadian residency and claim UK tax residency, you will have access to UK tax incentive programs (whatever the UK equivalents are of the RRSP and TFSA), and you can continue to maintain your Canadian RRSP and TFSA, but you cannot contribute any more funds until you claim tax residency in Canada again. If you retire before this time, I'm not sure about the rules. My understanding is that you can collapse your RRSP and TFSA, but there will be Canadian withholding tax on the RRSP deregistration, and potential UK tax top up. I'm not sure about the TFSA treatment though. For non-registered investments in Canada, they will be subject to Canadian withholding tax, but the UK will grant you a tax credit for the foreign tax paid.


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## Eclectic12

mike_302 said:


> ... Tax laws are such that I pay any tax over and above the UK tax, back to Canada.


Depends ... if you maintain your Canadian tax residency, then likely you will have to file a UK tax return and a Canadian tax return. 

The tax treaty between the UK and Canada will mitigate some or all of the double taxation.

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html




mike_302 said:


> ... So if I keep "substantial financial ties with Canada", then I have to do some relatively simple maths on these tax differences


I do not think it works the way you are describing it.
You would file whatever the UK requires and in addition, file a Canadian tax return (reporting your world wide income but also reporting the tax paid to the UK gov't).

http://www.theglobeandmail.com/glob...-learn-they-owe-ottawa-taxes/article17592602/




mike_302 said:


> ... Let's say I have a TFSA (which has ETF and stock holdings), and some ETF's outside that TFSA which are there long term (not being bought and sold). Does the UK care about these holdings? Would the TFSA gains/losses have to be reported in the UK?


For the TFSA, you will have to check with what the Canada-UK tax treaty allows (or consult a qualified expert).

For example, the Canada - US tax treaty does not recognise the TFSA as a retirement account (one can withdraw at any time) so it is taxable on the US tax return. As it is Canadian tax free, there are no credits to recover this tax that is paid.

The RRSP is tax free on cost but taxable on what is earned after cost (I believe on withdrawal) so the column I saw in a Globe and Mail article recommended that those moving to the US collapse their TFSA plus sell/rebuy their investments in their RRSP to increase the cost (which is tax free).


For the taxable accounts, from what I've read - likely the UK will tax the income but not CG where Canada will tax both. The tax treaty may change this so it all boils down the tax treaty. 





mike_302 said:


> ... I could of course cut substantial financial ties with Canada too --- move everything to the UK and save myself the Canadian taxation... Would I have equivalently beneficial tools like the Canadian TFSA and RRSP?


You will need to find out what the UK has and what the qualification requirements are. It is not the same but illustrates the idea ... when cut your ties to Canada (not just the financial ones - homes, banks accounts etc.), this means that:

a) there is a "departure" tax where the investments held in a taxable account will be "deemed dispositions". This means there can be a large capital gains tax to pay. There is a deferral that might benefit you should you be planning to return to Canada in the future.
http://www.theglobeandmail.com/glob...the-departure-tax-when-going/article22032765/ 

b) you won't be earning any RRSP or TFSA contribution room so these accounts will be capped. Even if you have enough $$$ when returning to add to these accounts, until contribution room is available, $$$ can't be added. One can withdraw from the TFSA but one can't contribute to it where one is a non-resident. RRSP withdrawals while a NR will be subject to a lower tax rate that may or may not be to one's advantage.

c) when you move back to Canada, you won't have provincial health coverage until the qualification period has been taken care of.


Bottom line is that there are a lot of variables where planning and investigating (not to mention consulting qualified professionals)




mike_302 said:


> ... There are clearly a lot of interesting questions here, and surely this isn't the first time these questions have had to be asked ...


I expect the challenge will be that with the US so close, there will be more info on moving to the US versus the UK.

The challenge here is that if the US example is any sort of indication, some actions *must* be taken before moving to the UK and some can be done after. With a move in 2016 (depending on when) - there might not be a lot of time to sort this out.


Cheers


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## Eclectic12

Robillard said:


> I would generally recommend that you get professional help in respect of your international tax compliance.


A good suggestion!

Where one searches CMF, there seem to have been a fair number of people who did not investigation that were surprised to hear of the "departure tax" when dropping Canadian tax residency or were surprised at how their new country treated things like the TFSA (ex. the US taxes it).




Robillard said:


> If you sever your Canadian residency and claim UK tax residency, you will have access to UK tax incentive programs (whatever the UK equivalents are of the RRSP and TFSA), ...


I believe I've read of US cases where one was still a Canadian tax resident but one qualified for some of the US tax advantaged programs. Figuring this out is likely another reason to consult a qualified expert.


Cheers


*PS*
Here's a link to the UK residency paper ....
https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt


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## mike_302

Thanks for the tips folks,

I have continued exhaustive research and I think it makes sense to maintain Canadian tax residency for at least the first couple of years -- especially since I have a chunk of nonrefundable tuition tax credits. It could be stressful and expensive otherwise, to sever those ties (lots of paper work and the "last tax return")

Getting "professional advice" has been a small part of my research, through qualified connections (friends, family, etc) -- it's really extraordinarily expensive though, and I can't respect companies like BDO, trying to charge me $300-$500/hour of research. I had one company quote me at $800/hour of consult, justifying it by saying, "They have experience with the Canada-UK moves"... I legitimately don't have enough money / financials to add up to that amount of savings in one year...

Anyways, as Eclectic12 pointed out, I had the taxation calculation process a little bit over simplified: I now appreciate and understand that you file and pay tax in the UK first, then claim back in Canada with the UK tax payment as a credit. Actually, I think I'm worse off by Canadian taxes  As an Ontario resident, I will owe a total of just over 20% on my earning above $11K I believe... So I will pay the UK 20% for $20K-$50K of my earnings, and then owe Canada more on top of that :S

The research goes on for now.

Thanks for everything so far.


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## lost in space

We left in 99 and I applied to become non residents because that seemed to be the way to go. Back then the only assets we had was our townhouse and our RRSP so the deemed disposition rule didn't apply. We did rent out our house for 2 years but the tax hassle not to mention being a long distance landlord. Generally speaking unless you are sitting on substantial capital gains it's best just to sever ties and be gone with it. The hassle not to mention the cost of filing 2 tax returns often ins't worth it. 

A lot of this was covered before but non resident taxation works like this

*Upon leaving*


Deemed dispossession, like death it's assumed you sold everything (except RRPS and TFSA) and paid tax accordingly.

RRSP: you can keep this but you can't contribute anymore - expect to pay UK taxes on any gains. You can cash it out but you'll face a 25% penalty

TFSA: again plan on paying UK taxes on this amount. TFSA didn't exist when we left so I'm not that familiar with them but I expect the gains will remain tax free from a Canadian point of view

Advantage is you'll have reduced income (unless you left 31st December), once your gone Canada won't care about your UK income. 

*Income after leaving*

Rental Income: very complicated as you have to file tax returns and have an agent (or you did back when I was a landlord). If could also complicate the sale at at a later date as it could be considered capital gains. 

Capital Gains: no tax on capital gains whoot whoot - of course the UK will want their pound of flesh!

Dividends and Interest Income: withholding tax - not sure on the UK but somewhere between 15 and 30 percennt

Again unless you highly paid executive or have substantial Canadian income it's best to become a non resident. I've been gone 15 years and I still have a Visa card, bank account and brokerage account but haven't filed a Canadian tax return in 16 years. In spite of the weakness of the dollar I still invest in Canada. 

Oh and yes, CPP and OAS will vest!


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## lost in space

From the comments section, couldn't have said it better myself

The article is nothing but scare tactics. There is no doubt millions of Canadian nonresidents do not owe Ottawa taxes; the number of Canadian's abroad that rightfully owe Canadian taxes are trivial compared to the total. From my experience, the most common reason nonresidents of Canada get into trouble is when they continue to use the Provincial health benefits as nonresidents and non-Canadian taxpayers.

While the other factors listed are indeed factors, none of them (other than the use of the health care) are determinative. Despite the fact CRA will say, if asked, that if you maintain a home in Canada you will be deemed a Canadian resident; there is nothing in the law to back up that position. People can have a number factors that, when combined, might make you a Canadian resident, but those people nearly always know they are Canadian residents; they are just trying to get away with something.

In summary, any person that leaves Canada and takes up residency abroad and takes the steps any reasonable person would take, such as spend more time abroad than in Canada, have a home abroad (they can keep their Canadian home), does not use the Canadian health care, and files a final Canadian return informing Canada that they have exited and have paid their exit tax, if any, will not be considered a Canadian resident.


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## mordko

While you can't contribute to TFSA and RRSP, you can contribute to ISA and pension funds while in the UK. When returning to Canada, British pension fund holdings can be transferred to an RRSP in Canada. Or you could keep them in Britain and transfer at a later time.


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## humble_pie

lost in space said:


> We left in 99 and I applied to become non residents because that seemed to be the way to go.



others have suggested that the OP might not have a lot of choice.

the fact that he still has "a chunk" of unclaimed tuition credits suggests to me that he's a young person who has not yet built up any profound financial ties to canada.

the fact that he balks at paying $500 & $800 an hour to international accountants who will be able to prepare 2 sets of tax returns - UK & canadian - also suggests to me that he should sever canada & go straight UK. He says he'll be working in the UK for at least 5 years, maybe 15, however one has to imagine that 15 years might lead on to forever.

it's true that our recent student here doesn't seem to want to file a final departure tax return. I believe there's also a form to submit for departing canada. Although these 2 documents might loom as hassles now, the complexity & costs of filing dual tax returns during those future years will likely be far greater hassles.

as for the student tax credits, there's a remote possibility these could be accepted on an Inland Revenue tax return for GB. Failing that, the credits might be just one more thing about canada to which he'll have to say good-bye.




lost in space said:


> Oh and yes, CPP and OAS will vest!


... although i believe these benefits might be pro-rated for the number of years after the age of 18 that the ex-pat did actually live in canada? i believe full benefits only accrue to returned canadians with 40 full years of residency after the age of 18? i could be wrong, but that's my belief at the moment.


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## james4beach

The good news is that there is a Canada-UK tax treaty, so double taxation is not a concern. The big choice here is whether to keep your Canadian tax residency and therefore file taxes in both countries. This is a grey area so there are no hard rules on whether you must. Two options: (A) or (B).

(A) If you sever ties to Canada and only have tax residency in the UK, you have to file departure taxes and probably also should transport your money to the UK. This is because banking/services in Canada become more awkward and limited if you are a non-resident of Canada. The situation where I think it makes sense to sever tax ties to Canada is if you believe you are leaving for the long term (10+ years), don't maintain a residence in Canada, and don't have Canadian income. If you are truly leaving Canada permanently there's no reason to keep filing in Canada.

(B) Obviously you can keep Canadian tax residency and file taxes in both countries if you are still maintaining a home in Canada, or maybe the family's home address. This is not nearly as difficult as it may sound. I file in both US and Canada, with residences in both. Filing the Canadian tax return is a _breeze_. First I finish the US tax returns. Then I do an electronic Canadian tax filing and claim foreign tax credit for all taxes paid to the other country. If Canadian taxes are in excess of the foreign tax credit, I put enough into my RRSP to zero it out. Expect the CRA to mail you a letter requesting paperwork to back the foreign tax credit. Then you can upload them the docs that support the foreign tax credit.

I went with (B) because it lets me continue growing my RRSP, does not disrupt my existing Canadian bank/investment accounts, and is easiest when I return to Canada. My foreign work visa is temporary and I expect the job to last 5-10 years. In other words the US can kick me out any moment, for instance if I lose my job. I'm just a visitor to the US, not a citizen, so I have no assurance of staying in the US at all. In making your decision you might want to consider your immigration status in the UK. Are you there with a temporary work permit? Are you a UK citizen?


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## Eclectic12

lost in space said:


> ... The article is nothing but scare tactics. There is no doubt millions of Canadian nonresidents do not owe Ottawa taxes ...
> 
> In summary, any person that leaves Canada and takes up residency abroad and takes the steps any reasonable person would take ...


Trouble is there have been several posts where people say they became ex-pats to benefit from lower overall taxes but also say they didn't consult anyone and from what is described ... did none of the mentioned things.

They may end up being not worth CRA's time but from the last six months worth of questions here ... I'm not so sure it is as low as you think.


Kudos to the OP for asking and investigating. 




lost in space said:


> ... Oh and yes, CPP and OAS will vest!


Sure ... but in the case of CPP, the point is that the ability to earn more CPP benefits is lost. Where one spends the tax differential, one may find that CPP paid on the eventual return to Canada and retirement is small.

Canadians who have their whole working lives to earn CPP credits don't understand the way it works ... never mind an ex-pat who has say 15 years of no credits. This may be due to company retirement estimators including maximum CPP payout numbers despite how difficult it is to earn max CPP benefits.



> When planning for retirement, the first piece of advice I give is not to plan on getting the maximum ...
> Eligibility to receive the maximum CPP benefit is based on meeting 2 criteria:
> Contributions – The first criteria is you must contribute into CPP for at least 83% of the time that you are eligible to contribute.
> Amount of contributions – Every year you work and contribute to CPP between the age of 18 and 65, you add to your benefit. To qualify for the maximum, you must *not only contribute to CPP for 39 years but you must also contribute ‘enough’ in each of those years.*


I'm not saying it should be the single factor to swing one's decision on keeping Canadian tax residency. Just that keeping a small amount earned means a small payout ... one needs to pay attention to the whole picture, how it applies to oneself and plan according.


Cheers


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## james4beach

Your CPP "max payout at retirement" only increases as long as you are employed in Canada. That is, pensionable earnings must be domestic Canadian employment.

In the years I'm working in the US, I am losing out on the ability to increase my CPP max payout. For instance when I log into Service Canada and look at the CPP that I could collect at retirement, it shows as of today that at retirement I'd only get 30% of the maximum possible. If I was working in Canada right now, that number would be creeping up slowly.


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## Eclectic12

Good point ... I'm confusing CPP with the RRSP contribution room being granted on "earned income".


Cheers


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## Robillard

mike_302 said:


> Thanks for the tips folks,
> Getting "professional advice" has been a small part of my research, through qualified connections (friends, family, etc) -- it's really extraordinarily expensive though, and I can't respect companies like BDO, trying to charge me $300-$500/hour of research. I had one company quote me at $800/hour of consult, justifying it by saying, "They have experience with the Canada-UK moves"... I legitimately don't have enough money / financials to add up to that amount of savings in one year...


These rates are pretty typical for a professional services firm. If you want to keep the cost down, you need to be very specific about what you are asking. Also, you should try to negotiate. Moreover, a local accountant will proably charge less than an international or mid-tier firm. However, a local accountant may not have much specific expertise in international tax.


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## lost in space

> (B) Obviously you can keep Canadian tax residency and file taxes in both countries if you are still maintaining a home in Canada, or maybe the family's home address. This is not nearly as difficult as it may sound. I file in both US and Canada, with residences in both. Filing the Canadian tax return is a _breeze_. First I finish the US tax returns. Then I do an electronic Canadian tax filing and claim foreign tax credit for all taxes paid to the other country. If Canadian taxes are in excess of the foreign tax credit, I put enough into my RRSP to zero it out. Expect the CRA to mail you a letter requesting paperwork to back the foreign tax credit. Then you can upload them the docs that support the foreign tax credit.


Wow I had no idea you could do this. When we moved to Germany back in 99 forums like this didn't exist so our research was limited to research in the library and email and calling family and asking them questions. Don't know if it was good or bad but we applied to become non residents. Even if I could I don’t think I’d want to file Canadian taxes as Germany is better for capital than Canada. 



> These rates are pretty typical for a professional services firm. If you want to keep the cost down, you need to be very specific about what you are asking. Also, you should try to negotiate. Moreover, a local accountant will probably charge less than an international or mid-tier firm. However, a local accountant may not have much specific expertise in international tax.


This issue came up in one of exat boards. I'm on this person used Trowbridge accountants in Toronto. Link to Post You might have to create an account to see the post.



> Quote Originally Posted by lost in space View Post
> ... Oh and yes, CPP and OAS will vest!
> Sure ... but in the case of CPP, the point is that the ability to earn more CPP benefits is lost. Where one spends the tax differential, one may find that CPP paid on the eventual return to Canada and retirement is small.
> -------------------
> Canadians who have their whole working lives to earn CPP credits don't understand the way it works ... never mind an ex-pat who has say 15 years of no credits. This may be due to company retirement estimators including maximum CPP payout numbers despite how difficult it is to earn max CPP benefits.


As long you’ve put enough years in (think the minimum is 5 but I couldn’t find an answer online) your CPP pension will vest. Again more years more money. For OAS it depends on where there is a social security agreement in place or not. Germany has one so I’m eligible for OAS but on a prorated basis 1/40 for each year after age 18 that I was a resident. Which brings up the next point, sure you’ll lose money by moving abroad but you’ll also be contributing to the social security system there and depending where you go the pensions can be far more generous. My wife’s working time is split pretty evenly between Canada and Europe and her pensions here (Germany Spain) are almost double what she’d get in Canada plus it’s paid in Euros. Andrew Hallam has written a lot on his blog about making sure you save enough if you’re not eligible for a local pension.


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## Eclectic12

lost in space said:


> Wow I had no idea you could do this. When we moved to Germany back in 99 forums like this didn't exist so our research was limited to research in the library and email and calling family and asking them questions.


I guess in my case, that's the benefit of growing up near the Canada/US border ... I've known about this for decades. Some chose to live in the US but keep their family in Canada while others did the cross bridge commute daily.




lost in space said:


> ... Which brings up the next point, sure you’ll lose money by moving abroad but you’ll also be contributing to the social security system there and depending where you go the pensions can be far more generous. My wife’s working time is split pretty evenly between Canada and Europe and her pensions here (Germany Spain) are almost double what she’d get in Canada plus it’s paid in Euros.


Yet more reason to investigate early to develop a plan ... as I said either in this thread or another - there seem to be a rash of posts lately where the move has happened and then thinking about tax implications later.



Cheers


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## Jaberwock

If you work for more than 3 years in the UK, and pay into the UK pension system, you will qualify for a UK pension. The maximum amount is about $1500 every 4 weeks (depending on the exchange rate). You need to contribute for 30 years to get the maximum. If you work there for 15 years, you will qualify for 50%, which will more than compensate for any losses in CPP.

One drawback however, is that if you return to Canada your UK pension will be fixed at age 65 and will not be indexed to inflation. If you stay in the UK, or go to any one of a number of countries that have a tax treaty with the UK, your pension will remain indexed. This might seem like a small issue when inflation is only 2% per year, but it adds up and eventually erodes your pension to the point where it is worth much less than it was when you started drawing it


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## Eclectic12

^^^^

Interesting info .... but last I checked - both Canada and the UK thought they have a treaty signed and in force.
So it may more be like " ... where one goes to a country that negotiated a better tax treaty than Canada's".


Cheers


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## JeanJean

*non resident*

Hi, I have a question to you.

I left canada in mid 2004. i considered myself as non resident because i had no canadian tie (according to the taxation definition). that is, i had no bank account (except rrsp), no property, no lease, etc. And I haven't used OHIP ever since. even my driver license was expired. 
The year I left, I had no income from canada. Therefore I did not do any income tax filing before my leaving.
And I have not do any income tax filing with canada tax since 2004, because I have not had 1 cent of income from canada. 

Now I am considering to buy a property for investment purpose in canada. I plan to rent it out. and I'll have to file income tax with canada as a non resident for year 2016 (i.e. to be filed in 2017). 
shall I do something (say: re-assert my non resident status) for year 2004 - 2015 when I made no file with CRA? 
when I do filing for 2016, will CRA ask me what happened during all the missing years (2004-2015)? 
any suggestion is welcome and highly appreciated. thanks




lost in space said:


> We left in 99 and I applied to become non residents because that seemed to be the way to go. Back then the only assets we had was our townhouse and our RRSP so the deemed disposition rule didn't apply. We did rent out our house for 2 years but the tax hassle not to mention being a long distance landlord. Generally speaking unless you are sitting on substantial capital gains it's best just to sever ties and be gone with it. The hassle not to mention the cost of filing 2 tax returns often ins't worth it.
> 
> A lot of this was covered before but non resident taxation works like this
> 
> *Upon leaving*
> 
> 
> Deemed dispossession, like death it's assumed you sold everything (except RRPS and TFSA) and paid tax accordingly.
> 
> RRSP: you can keep this but you can't contribute anymore - expect to pay UK taxes on any gains. You can cash it out but you'll face a 25% penalty
> 
> TFSA: again plan on paying UK taxes on this amount. TFSA didn't exist when we left so I'm not that familiar with them but I expect the gains will remain tax free from a Canadian point of view
> 
> Advantage is you'll have reduced income (unless you left 31st December), once your gone Canada won't care about your UK income.
> 
> *Income after leaving*
> 
> Rental Income: very complicated as you have to file tax returns and have an agent (or you did back when I was a landlord). If could also complicate the sale at at a later date as it could be considered capital gains.
> 
> Capital Gains: no tax on capital gains whoot whoot - of course the UK will want their pound of flesh!
> 
> Dividends and Interest Income: withholding tax - not sure on the UK but somewhere between 15 and 30 percennt
> 
> Again unless you highly paid executive or have substantial Canadian income it's best to become a non resident. I've been gone 15 years and I still have a Visa card, bank account and brokerage account but haven't filed a Canadian tax return in 16 years. In spite of the weakness of the dollar I still invest in Canada.
> 
> Oh and yes, CPP and OAS will vest!


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## mike_302

Thanks again for all the support.

I have been telling myself the same electronic filing advice that james4beach has provided (that it's relatively easy to file the Canadian tax return electronically myself; I'll just do the UK tax return first, and make sure to get a tax filing software with good support for the first year, and gain that experience in year 1).

An earlier poster is very much correct: I am just finishing a graduate degree in Canada -- young and presumably some time ahead of me. This is what makes a lot of this discussion rather daunting: I have not built up a confidence with RRSP or pension terminology yet -- I just know about the TFSA, and that there's a certain date every year to which you can contribute to your RRSP, and that amount of income is not tax-deductible... Add on that I am going to another country's system, contributing to a company pension plan; also add on that I am waiting to see if I obtain EU citizenship from Hungary (through ancestry); further add on that the UK may or may not leave the EU... It's actually a gigantic nightmare 

I will probably be back for more eventually.

Thanks again


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## OhGreatGuru

This bulletin from the UK: http://www.hmrc.gov.uk/manuals/dtmanual/dt4617.htm explains (in Catch-22 logic) how the UK is taxing withdrawals from CDN RRSP/RRIF, while claiming it isn't double taxation. 
a) They claim they don't tax the actual withdrawal, because that is taxed in Canada;
b) They are taxing the Capital gain on the disposition that was necessary for you to make the withdrawal, because they claim Canada hasn't taxed that;
c) They won't even allow you to credit the CDN withholding tax against the UK tax _(Since no UK tax is computed by reference to the subject of Canadian tax (that is, the withdrawal), no tax credit relief is allowable.)_

Monty Python is alive and well it seems. The long and the short of it is that RRSPs are not accepted as an equivalent tax shelter, the way they are by the US IRS.

I wonder, since this bulletin is all about withdrawals, if you return to Canada before making any withdrawals, would the UK let you escape without taxing it? Or would they treat your RRSP as "deemed disposition"?

Something to write to your MP about.


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## Eclectic12

The UK tax bulletin I looked at was more along the lines that a tax treaty does not always mean one escapes double taxation.

I would agree that a better treaty would be helpful ... but then again, I have no confidence that writing my MP is going to change the USA's stance that the TFSA is taxable for the IRS as "it is not a retirement account".


Cheers


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## mike_302

Hi all,

It's been a while.

I'm in the UK now (as of September 2016). I have some work to do to do my taxes for 2016, in both Canada and the UK. I'm confident that I can declare myself a non-resident for tax purposes, as of September 2016, so I'm going to run on that premise.

For my Canadian taxes: I've decided I'm going to give this a shot on my own. I think I will file as normal. I think there's a way I can declare non-resident for tax purposes as of a certain date, on the standard tax forms / software. Then, I gather there's a certain line on the tax forms where I'll input my earnings from a foreign country that has a tax treaty with Canada (e.g. the UK)? I understand that my December pay slip from my UK employer will give me the total taxes paid here in the UK for 2016, and it should be "simple as that". 

Finally, I have stocks and ETF's in a Margin and a TFSA account (in Canada). I know that I'll have to declare the capital gains and losses on these as of September 2016... Frankly, I don't think I have the time to figure this stuff out, but I think I can keep track of it if I get the info up until the end of 2016. So two questions for this:
1. Do you think I could give an accountant my account statements and get them to give me the right numbers to put on my tax form (with respect to the Margin and TFSA accounts), for less money than they're quoting to do ALL of my taxes?
2. Do you think I could get an accountant to present me a summary report that says "here is all the info up until the end of 2016", and I could start tracking it all going forward using my annual tax slips / account summaries from my broker?

Looking forward to your thoughts / input.


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## Eclectic12

mike_302 said:


> ... I'm in the UK now (as of September 2016) ... For my Canadian taxes: I've decided I'm going to give this a shot on my own. I think I will file as normal. I think there's a way I can declare non-resident for tax purposes as of a certain date, on the standard tax forms / software. Then, I gather there's a certain line on the tax forms where I'll input my earnings from a foreign country that has a tax treaty with Canada (e.g. the UK)? I understand that my December pay slip from my UK employer will give me the total taxes paid here in the UK for 2016, and it should be "simple as that".


That's not the way I read the CRA "Leaving Canada (emigrants)" and the NR web pages.

NR status starts at the later of:
- left Canada
- spouse and dependants left Canada.
- date you become a resident of the country you settle in
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html

If there's a later date, there may be some overlap where one would still be a a Canadian tax resident and the UK employer may be paying income, UK taxes deducted. 

If it really is "date of departure" where the next day was taking up residency in the UK, my understanding is Canadian income/credits etc. all apply, up until that date. After that date, there's no Canadian tax on the UK employment and only a few types of Canadian tax applies.

See *What income do you have to report?
Part of the tax year that you WERE a resident of Canada ...
Part of the tax year that you WERE NOT a resident of Canada ...* of the link.
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html

I'd have to re-read the thread to be sure but I am thinking that there's no UK income/taxes until after you've moved (which puts you in the clear for while you were Canadian tax resident) and with the date of departure being before the UK income started flowing, being a Canadian NR means the UK income is not reported.

Letting the financial institutions that hold the investments know your new UK address should mean the appropriate withholding tax is taken automatically.
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html




mike_302 said:


> ... Finally, I have stocks and ETF's in a Margin and a TFSA account (in Canada). I know that I'll have to declare the capital gains and losses on these as of September 2016...


The tax is triggered by the departure ... but if it qualifies and you aren't selling them, you can use T1244 to defer paying to when it is sold. IF there is any chance of a return to Canada, I suspect deferring could be a better choice.
See "Deferring the tax owing" at http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/dspstn-eng.html.




mike_302 said:


> ... Frankly, I don't think I have the time to figure this stuff out, but I think I can keep track of it if I get the info up until the end of 2016. So two questions for this: 1. Do you think I could give an accountant my account statements and get them to give me the right numbers to put on my tax form (with respect to the Margin and TFSA accounts), for less money than they're quoting to do ALL of my taxes?


The first misunderstanding is the TFSA ... it does no have any Canadian tax associated with it. There's nothing to figure out or report for the TFSA. You do need to be sure of how the UK treats the TFSA but from a Canadian tax perspective, there's nothing to do and the change is that leaving mean you stopped getting new contribution room and you can't make any more contributions (withdrawals are okay).

For the taxable account, I have found in the past that understanding what to do as well as keeping spreadsheet I update, at worst once a year, with transactions that affect the tax info saves a lot of time and effort.

Giving it to someone else to do would save effort but my understanding is accountants charge for this (not sure how it compares to fees for the return itself but I suspect it is higher as this is tedious).

Since you mention ETFs, here is a link.
http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm

Basically it's all the buys, using income that affect the cost such as RoC (which ETFs tend to pay in small amounts) and for a Canadian ETF, dealing with phantom distributions (American ETFs apparently don't have these).
http://www.theglobeandmail.com/glob...by-phantom-etf-distributions/article18225076/
http://www.theglobeandmail.com/glob...n-with-phantom-distributions/article18409698/

Before going the accountant route, I'd suggest picking one, working though it and asking questions here. You may find like I did that after understanding what info is needed and digging it out, a well setup spreadsheet handles most of the work. Near as I can tell, the main info that is harder to find is when the ETF company does not make it easy to find out about phantom distributions. Everything else is usually easy to find.

If you elect to defer the departure tax, at least from a Canadian tax perspective - this would buy you time to learn and decide what to do. What the UK does may be a different story.




mike_302 said:


> ... 2. Do you think I could get an accountant to present me a summary report that says "here is all the info up until the end of 2016", and I could start tracking it all going forward using my annual tax slips / account summaries from my broker?


The tax slips from the broker are mainly about the Canadian tax for the payments made or info from selling. 

It does include a bit of info about return of capital (RoC) but it is likely rolled up so unless there's a detail document that breaks down "$2354" RoC means $1000 RoC for ETF #1, $800 for ETF #2 and $554 RoC for ETF #3, I am not sure how helpful it will be. Then too, once they know you are in the UK, I am not sure if the broker would keep producing the T forms as I understand it, you are down to the flat NR withholding tax on income paid.

The ETF web site, on the other hand, usually has an easy to find breakdown - some going back almost twenty year. They break it down per unit.

Or there's web sites like ... http://www.adjustedcostbase.ca/


Cheers


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## mike_302

Wow! That was a detailed response and I'm going to have to go through it in pieces with multiple responses.

I want to start out by clearing up some stuff from the beginning:

I understand that the government suggests a long list of things for becoming Non-Resident for Tax Purpose. However, I have spoken to others who have done it and translated it into more practical terms. Therefore, I am going to go out on a limb and declare non-residency (you can simply check a box on the tax return, as many others have done) based on the following facts: I have left Canada and become resident in the UK (you don't have to be a permanent resident --- just have an address); because I have closed all but a few remaining savings accounts (Which you can still have, even as a non-resident --- as long as it's not part of a long list of things you maintain); I don't have any real estate or vehicles in Canada; and my OHIP and drivers license have lapsed. There's a form you can fill out to get officially declared non-resident, but I'm told that the government takes ages to confirm it, they respond inconsistently, and it's a massive hassle that's just optional...

Regarding my decision to declare non-residency and pay taxes on my assets: Actually, I only made the switch to ETF funds around this time a year or two back, and I paid capital gains/losses at that time, because I had to sell all my mutual funds before rebuying all the ETF's... I also have tax credits from tuition payments, and they should cover any amount owing. Going non-resident should mean that I don't pay any taxes on the money earned that is a discrepancy in the Canadian and UK tax code (i.e. the UK may have some higher tax rates, but nearly half my earnings are covered by the UK's personal tax exemption!).

One final item for this initial response: I just want to clear up that I don't plan on taking any of the investments out of Canada. I plan on keeping that money in the brokerage accounts, so I didn't think there'd be any tax other than capital gains and dividend income? I think those are the only numbers I have to declare to the UK tax authority --- capital gains and dividend income in my Canadian brokerage accounts.


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## Eclectic12

mike_302 said:


> Wow! That was a detailed response and I'm going to have to go through it in pieces with multiple responses.


No problem ... sometimes it ends up being longer than I thought!




mike_302 said:


> ... I understand that the government suggests a long list of things for becoming Non-Resident for Tax Purpose. However, I have spoken to others who have done it and translated it into more practical terms. Therefore, I am going to go out on a limb and declare non-residency (you can simply check a box on the tax return, as many others have done) ...


With this type of move, that is what I read on CRA's web site as well.




mike_302 said:


> ... Regarding my decision to declare non-residency and pay taxes on my assets: Actually, I only made the switch to ETF funds around this time a year or two back, and I paid capital gains/losses at that time, because I had to sell all my mutual funds before rebuying all the ETF's... I also have tax credits from tuition payments, and they should cover any amount owing.


Having just paid CG to do the switch - that should help reduce the departure tax. Having other sources of reducing taxes should also help.




mike_302 said:


> ... Going non-resident should mean that I don't pay any taxes on the money earned that is a discrepancy in the Canadian and UK tax code (i.e. the UK may have some higher tax rates, but nearly half my earnings are covered by the UK's personal tax exemption!).


Sounds like a good deal ... 




mike_302 said:


> ... One final item for this initial response: I just want to clear up that I don't plan on taking any of the investments out of Canada. I plan on keeping that money in the brokerage accounts, so I didn't think there'd be any tax other than capital gains and dividend income?


For Canada, up until you become NR - there is CG as well as income (ETFs typically pay mixes of income - some dividend, some run of the mill, some RoC). Becoming NR triggers the departure tax which would be the final CG bill to pay to Canada for the investments. As I understand it, being a UK tax resident means your cost base for the investments start at FMV of the departure ... which means any CG after being NR are due to the UK with no CG due to Canada.

Some of the income the ETFs pay like dividends may be subject to the Canadian NR withholding tax (high end of 25%, possibly reduced by tax treaty).




mike_302 said:


> ... I think those are the only numbers I have to declare to the UK tax authority --- capital gains and dividend income in my Canadian brokerage accounts.


Sounds right ... but I'm more familiar with the Canada - US stuff, having worked in the US.

The other question is how the UK treats the TFSA. Most who have moved to US tax residency drained their TFSA as the USA taxes it where Canada does not.


Cheers


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## mike_302

Eclectic12 said:


> The other question is how the UK treats the TFSA. Most who have moved to US tax residency drained their TFSA as the USA taxes it where Canada does not.


This relates to the next point I was going to bring up from your first longer post, yesterday:

I understand that the UK doesn't recognize the tax-free nature of the TFSA. So while Canada won't charge me tax on any capital gains (e.g. dividends, or if I sell a stock or ETF), the UK will care about these gains/losses, as if the TFSA were just a standard margin account. Now, "draining" sounds a bit drastic, since it would ACTUALLY mean selling the investments, and that's just yet another set of calculations to account for the actual disposition of those assets... So I planned to just keep them in the account and work this into any spreadsheet I build. It will likely mean manually gathering the sells, buys, and dividends for those assets though, since the broker will not create a tax form for this.

I will continue to respond to your first long post in additional stages. Thanks again for your help. I just want to be self-sustaining with all of this! And as I don't have a business or a complicated situation, I strongly believe this should be possible...


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## mike_302

I'm filling in NR301 for my brokerage account.

Part 7 asks which income the declaration is for. I know I should at least check off "Interest, dividends and/or Royalties", but what about capital gains? I think the choice here depends on my new country for tax purposes (i.e. UK) and the relevant tax treaty. If that's the case, then my understanding is that I'm only asking Questrade to withhold a (reduced) tax on my Dividend and Interest earnings. Then, when I report to the UK tax authority, I tell them what I earned in dividends and interest, but I also report that I paid some tax rate on it. They will either ask me for a cut of it (if the UK rate is higher) or give some credit for that additional amount I paid. 
The tax treaty does not do the same for Capital Gains, so I would not fill in "Other - All Income". I will report capital gains to the UK tax authority (and no longer to the CRA after I file my departure tax return), in which case I will get up to 11K GBP in personal allowance on those gains, in accordance with Non-dom rules for UK residents paying tax on foreign income on an "arising basis".

This is my latest understanding. I've been piecing this all together with a lot of help from this forum and short chats with tax experts who have helped put this foreign tax challenge into relatively plain English.

Let me know how far I'm off


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## Eclectic12

mike_302 said:


> This relates to the next point I was going to bring up from your first longer post, yesterday:
> 
> I understand that the UK doesn't recognize the tax-free nature of the TFSA. So while Canada won't charge me tax on any capital gains (e.g. dividends, or if I sell a stock or ETF), the UK will care about these gains/losses, as if the TFSA were just a standard margin account.


That is unfortunate.




mike_302 said:


> ... Now, "draining" sounds a bit drastic, since it would ACTUALLY mean selling the investments, and that's just yet another set of calculations to account for the actual disposition of those assets... So I planned to just keep them in the account and work this into any spreadsheet I build ...


By "draining", I meant removing the assets ... my broker allows stock to be transferred in and *out* of the TFSA. 

From the UK's tax perspective, I don't believe it would be a sale. 

It may also mean that as the investment, going forward, is in the taxable account, the tax forms might be generated (check with the broker). The discrepancy I can think of is that likely the broker will use the FMV ... which probably is not accurate. 


Cheers


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## Eclectic12

mike_302 said:


> I'm filling in NR301 for my brokerage account.
> Part 7 asks which income the declaration is for ...


Sounds weird to me as the articles I have read, including CRA's, talk about giving an address to the financial institutions. This lets them know the country so that the appropriate withholding tax as well as what types of income as subject to the withholding tax are known (presumably from the relevant tax treaty).

I'll take a look when I get a chance & let you know what info (if any) I can find.


Cheers


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## mike_302

Called the CRA today, and had a few more free evaluations from International Tax Experts: the expertise is coming together. 

Ecclectic, I think we need to join forces and write a small guide for expats  ? I think there's enough people in my shoes (i.e. moved abroad with Canadian investments, without real estate), and the existing guides are too formal and try to cover too many cases...

In seriousness:
I've confirmed with a Tier 3 International Expert at the CRA, that I will first declare my assets using T1161. Then, I will use form T1243 to declare deemed disposition of those assets as of September 2016. Essentially, I'm declaring Adjusted Cost Basis less Fair Market Value for those assets I declared on T1161. I think Questrade is technologically advanced enough that they should be able to provide me with both these numbers for all my holdings as of September 1. After those numbers are settled, I include it on my 2016 tax return to Canada and if there is a net gain, it will come out of my tuition tax credit. Going forward, my capital gains don't get reported to Canada anymore: I only report them to the UK tax authority which allows £11K personal allowance for capital gains! Hurrah!

On dividends and interest: Questrade was not withholding taxes on dividends and interest until possibly another month from now ( I only just filled out some form to declare non-resident and simultaneously apply for a reduced withholding tax due to residence in a treaty-country). So my dividends and interest income situation has to be corrected because technically they should've skimmed off something like 15% (Canada-UK tax treaty) for the government. A Part XIII specialist informed me that I can simply call in with the numbers from my Questrade T5 and they will sort it out rather than me filing another tax return for 2017. I'll pay the reduced tax rate according to the Canada-UK tax treaty. I think this will also come out of my built-up tax credit.

I think the biggest challenge in sorting all of this stuff out is that so much info available online is trying to cater to expats from any country. From what I've been gathering recently, it's much easier for expats living in countries that have a tax treaty, and the UK is a particularly popular one for Canadian expats.


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## Eclectic12

mike_302 said:


> ... Ecclectic, I think we need to join forces and write a small guide for expats  ? I think there's enough people in my shoes (i.e. moved abroad with Canadian investments, without real estate), and the existing guides are too formal and try to cover too many cases...


Could be fun ... not sure what I'd have all that much time for it.




mike_302 said:


> ... In seriousness:
> I've confirmed with a Tier 3 International Expert at the CRA, that I will first declare my assets using T1161. Then, I will use form T1243 to declare deemed disposition of those assets as of September 2016. Essentially, I'm declaring Adjusted Cost Basis less Fair Market Value for those assets I declared on T1161.


Maybe you are aware of this and it's simply a wording issue ... but when looking at CRA's sample T1243 available at their web site, it seems close to identical to Schedule 3, Part 3 where one would report the sale of a stock/MF. The difference that jumps out at me is that there's no column for "Outlays and Expenses from dispositions" ... which makes sense at this is a deemed disposition that does not have a sale commission expense.

I suspect the CRA computers would catch it but the form clearly says the same math as Schedule 3, Part 3. The math is FMV - ACB to determine CG (or CL) for the last column. Going the other way round is going to switch CG into CL and visa versa.




mike_302 said:


> ... I think Questrade is technologically advanced enough that they should be able to provide me with both these numbers for all my holdings as of September 1 ...


For the ACB part, I prefer to calculate it myself ... if the broker and I agree then I am far more confident it is right. ETFs have more variables to take care of like return of capital or non-cash reinvested distributions (aka phantom distributions) but where one takes the time to understand, IMO it's only confirming the non-cash reinvested distributions that can be tricky. Everything else is tedious but manageable.

I haven't asked my broker but it wouldn't surprise me if the FMV part was the harder part. It can help to go to "Yahoo -> Finance". Get a summary quote for the ETF in question, like "XIU.TO" for iShares TSX 60 index. There's a bar a bit down the screen that should have "Summary" highlighted - select "Historical Data". Most of the time it will give trading prices by date with "open", "high" and "low" values. You might have to adjust the "Time Period" link for the date you need, where after making the changes, click the "Apply" button.

I have a PDF print driver so for stuff like this, I print the page to a PDF as backup documentation, in case CRA (or I) have questions in the future.




mike_302 said:


> ... After those numbers are settled, I include it on my 2016 tax return to Canada and if there is a net gain, it will come out of my tuition tax credit. Going forward, my capital gains don't get reported to Canada anymore: I only report them to the UK tax authority which allows £11K personal allowance for capital gains! Hurrah!


Nice that potentially the gains may be absorbed by other items.





mike_302 said:


> ... On dividends and interest: Questrade was not withholding taxes on dividends and interest until possibly another month from now ( I only just filled out some form to declare non-resident and simultaneously apply for a reduced withholding tax due to residence in a treaty-country). So my dividends and interest income situation has to be corrected because technically they should've skimmed off something like 15% (Canada-UK tax treaty) for the government. A Part XIII specialist informed me that I can simply call in with the numbers from my Questrade T5 and they will sort it out rather than me filing another tax return for 2017 ...


Nice that it won't take another tax return to deal with the disconnect.




mike_302 said:


> ... I think the biggest challenge in sorting all of this stuff out is that so much info available online is trying to cater to expats from any country. From what I've been gathering recently, it's much easier for expats living in countries that have a tax treaty, and the UK is a particularly popular one for Canadian expats.


IMO, part of the problem is also that the topic gets simplified. 

As an example, I've read for years that the US does not tax the RRSP - the part that usually glossed over is that the US tax free part is the ACB. Miss this subtlety and the US taxes to pay could be higher than expected.


Cheers


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## mike_302

Hello again!

I have an update and further inquiries 

Canadian tax filing went well after I submitted a massive load of paperwork via fax. I had a small return, and I think the CRA acknowledges that I am non-resident for tax purposes. I included a personalized letter explaining that I could provide any further paperwork if necessary, and that I think one of my accounts had incorrectly identified my residency for a few months -- so I wanted to have that issue cleared up and to pay back whatever was owed for tax purposes. I think it was such a small amount that they didn't bother (pennies...).

Two things now:
(1) I am going about my UK tax business, filing a self-assessment where I have to identify foreign income. Since I have a TFSA and a regular margin account, plus a regular chequing account, I was hoping that my income numbers from these accounts were collated somewhere. If anywhere, I can imagine the CRA has this info, including the amount of tax paid on that income. i.e. I assume the CRA knows I received $X in dividends, $Y in interest, and $Z in capital gains, and that I paid $Xw, $Yw, and $Zw* in non-resident withholding tax on those dividends, interest, and capital gains (respectively). *I understand that $Zw is $0 because capital gains would not be withheld on the sale of a position in Canada; $Z would be reported to the UK HMRC and $Zw calculated and paid to the UK's HMRC according to UK rules.
How can I get these dollar values? Surely I can find this with relative ease, through CRA or possibly through my broker / bank... Guidance please?

(2) Rebalancing my portfolio for the long term: I am considering selling the portion of my ETF portfolio that sits in my TFSA, and moving it all to the Margin account, just to avoid any future inconveniences with rebalancing -- as a non-resident, I can move money out of the TFSA, but my TFSA room does not grow, I cannot move it around, and I will not have extra cash sitting in the TFSA to rebalance. The UK does not recognize the TFSA as a tax-savings vehicle, so there is no tax-advantage in this case (thankfully, the UK does have a £5,000 personal allowance for capital gains, and I'm not successful/wealthy enough to exceed that limit ). Any comments on this? Warnings / major disadvantages? If I move back in five or ten years, am I at a major disadvantage if I make this move now?

Thanks!


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## Eclectic12

mike_302 said:


> ... Two things now:
> (1) I am going about my UK tax business, filing a self-assessment where I have to identify foreign income. Since I have a TFSA and a regular margin account, plus a regular chequing account, I was hoping that my income numbers from these accounts were collated somewhere ... How can I get these dollar values? Surely I can find this with relative ease, through CRA or possibly through my broker / bank... Guidance please?


AFAICT, it all depends on what your broker does. 

If they roll everything up into one T5 form, that would work in the way you are thinking. It would be more work for me as my broker issues no T5 form for the interest paid as it is less than the legal requirement (I get this from the monthly statements) and two T5 forms for the eligible dividends. The first form might have the dividends for stocks A, B, C and D while the second form will have stocks E, F and G.

For REITs and ETFs, same concept of multiple forms for multiple companies. The difference with the T3 form is that in addition to eligible dividends, if the REITs/ETFs pay income that was classed as capital gains, other income or return of capital - these will also be included on form.

If you have online access to the T forms, it shouldn't be too bad to consolidate what needs to be consolidated. 


For the regular chequing account, if the interest paid is less than $50 - then you will have to use your statements to add it up.


If you were still a Canadian tax resident filing tax returns, you could use the CRA autofill feature to get copies of what T forms have been passed to CRA. I am not sure this is available to a NR.

The NR withholding tax should at least be showing up on the broker's statements but never having been a NR, I don't know if any consolidation on a form happens.


Maybe an email or call to your broker in Canada to see how they handle NRs?




mike_302 said:


> ... The UK does not recognize the TFSA as a tax-savings vehicle, so there is no tax-advantage in this case (thankfully, the UK does have a £5,000 personal allowance for capital gains, and I'm not successful/wealthy enough to exceed that limit ). Any comments on this?


The taxable status of the TFSA is probably the bigger issue than re-balancing. Add in that as the TFSA is Canadian tax free - no T forms are produced so keeping the TFSA is going to complicate reporting the UK taxable items that are paid as income.


As a resident of the UK, as I understand it, you would be eligible to use the UK version of a TFSA, the ISA.
https://www.gov.uk/individual-savings-accounts

Is it that you want to keep the North American investments that rules out taking the proceeds from the TFSA to fund the UK based ISA?


Cheers


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## mike_302

Thanks Eclectic.

I will have to give the broker a call then (i.e. Questrade). I was mainly hoping someone would be able to tell me that I can get this info from the CRA (due to time zone differences, I've been having a hard time scheduling a time to give them a call and to wait on hold...). Do you know if this is a type of calculation that a tax accountant should be able to do for a reasonable sum? Or perhaps a service that some arm of Questrade would provide? I'm still intent on avoiding $500 fees for some accountant to do 30 minutes of work, but maybe I'll get lucky... 

Re: the account changing: I think you're absolutely right about switching from a TFSA to simplify the UK tax situation. For me, I am hesitant to switch everything to a UK ISA because I want to hedge my bets in the long term -- i.e. I don't want to switch everything to the pound. I'd rather keep this pot of money in Canadian. The way I see it anyways, I should not have to move a substantial amount of cash in the rebalancing act, and considering I get a 5000GBP personal allowance on capital gains in the UK, my portfolio would have to be doing pretty darned well before I ever owed anything from simple rebalancing!


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## Eclectic12

mike_302 said:


> ... I will have to give the broker a call then (i.e. Questrade). I was mainly hoping someone would be able to tell me that I can get this info from the CRA (due to time zone differences, I've been having a hard time scheduling a time to give them a call and to wait on hold...)


Where timing is an issue ... maybe an email works better?

Either way, perhaps you can enlighten me ... I assume you were receiving from Questrade T forms for when you were a Canadian tax resident that filed only a Canadian tax return. Shouldn't the past forms be able to tell you how Questrade approaches the T forms? Or was the taxable account one type of investment where the TFSA has a bunch of different types?




mike_302 said:


> ... Do you know if this is a type of calculation that a tax accountant should be able to do for a reasonable sum? Or perhaps a service that some arm of Questrade would provide? I'm still intent on avoiding $500 fees for some accountant to do 30 minutes of work, but maybe I'll get lucky...


From what others who use accountants have posted - my guess would be that the items you are describing, it would be along the lines of "$500 for 30 minutes work". Unless there is a specific question or expertise needed, having to provide the details seems the accountant has the simple part of the work.


Do you know what the deadlines are for the UK return and how they mesh with Canadian T form deadlines?

My concern is that my online forms are one a staggered schedule, starting the following year. For tax year 2017, the buys/sells for my taxable account show up on a T5008 around about mid Feb 2018. The T5 forms for eligible dividends show up around the end of Feb 2018 and the T4 forms for REITs/ETFs show up mid-Mar 2018. 

*Edit:*The ETF company web site typically has the breakdown posted earlier than the T3 forms are processed/sent by the broker but it is likely late Feb or early March 2018.

Does this allow you enough time to figure out what to report for CG, interest and whatever else that has to be reported on the UK return?

If not - the possible fly in the ointment is the breakdown of what the ETFs paid as it can vary from year to year. I don't see interest, eligible dividends or Canadian withholding tax as an issue as the monthly statements provide that each month.





mike_302 said:


> ... Re: the account changing: I think you're absolutely right about switching from a TFSA to simplify the UK tax situation.
> 
> For me, I am hesitant to switch everything to a UK ISA because I want to hedge my bets in the long term -- i.e. I don't want to switch everything to the pound. I'd rather keep this pot of money in Canadian ...


So there's no ISA accounts that allow CAD or investments that are CAD based?




mike_302 said:


> ... The way I see it anyways, I should not have to move a substantial amount of cash in the rebalancing act, and considering I get a 5000GBP personal allowance on capital gains in the UK, my portfolio would have to be doing pretty darned well before I ever owed anything from simple rebalancing!


Maybe not .... but don't forget to check if some of the distributions paid as cash by the ETFs *is* classed as CG. That would be reducing your personal allowance, without buying/selling anything. The run of the mill common stock like BNS won't have CG without a sale or special event. For investments that pay mixed types of income like REITs or ETFs, CG can be common. 

It may not add up to much but knowing about it may change one's decision as well as allow one to avoid questions later.



Cheers


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## mike_302

I just prefer to call these places (CRA, Questrade, etc.). I got a rather helpful agent twice now, from Questrade; he's actually Irish... Good chatting with him 

As for what Questrade provides: I can't trust the tax slip they provide to non-residents, mostly because it won't identify the necessary details (or even any details...) re: activities in the TFSA. So my discussion this evening with the helpful Irish fellow lead to using Questrade's Account Activity tool to set a time period for which I am interested in the account activities, and then I can export an Excel spreadsheet for that time. Now I have to sort through the Gross, Net, and Commissions, and understand these values in the context of their respective actions. Some actions are dividends and some are dividend reinvestments (*and I'm not sure how I count these up to identify taxable gains*); I didn't sell any funds in the last UK tax year, but that will be an added challenge next year; and Questrade has a messy way of withholding the tax as I am non-resident: the full dividend is credited to me and then a second activity debits by account for 15% of the full dividend amount. *Actually, I thought the withholding tax should've been 25%... So I'm not sure why I'm only being debited 15%... But I will happily accept it.*

The UK tax year begins and ends on the 5th of April; there is one year to complete your self-assessment thereafter -- so it's better than in Canada in that sense. However, I have been doing this whole tax sorting exercise for absolutely far too long now, and I just want to wrap it up. That said, I still think an accountant would be a rip off because I would still need to collect all these numbers and understand them before handing them to an accountant who would do the easy part... If I just handed an accountant the Questrade activities excel spreadsheet, they'd probably do my taxes and tell me it took 5 hours * $1000/hour...

I did a quick search for Canadian Dollar ISA's and didn't find anything. At the end of the day, I see it as the cost of saving a nest egg in another country... If my capital gains exceed the personal allowance in the UK, I won't be devastated to pay the relevant tax on that profit. I've still made a profit, and the public coffers can have their fair share.


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## Eclectic12

mike_302 said:


> ... I can't trust the tax slip they provide to non-residents, mostly because it won't identify the necessary details (or even any details...) re: activities in the TFSA.


True ... in my edits, I seem to have removed the part that nothing will be reported for the TFSA as CRA only cares about the contributions/over-contributions and the broker does not want to spend processing power/money to produce forms that most clients won't have a use for.




mike_302 said:


> ... using Questrade's Account Activity tool to set a time period for which I am interested in the account activities, and then I can export an Excel spreadsheet for that time. Now I have to sort through the Gross, Net, and Commissions, and understand these values in the context of their respective actions.


These seem strange titles so I can't help but wonder if it might be easier to use monthly statements that include the details of the transactions.

Either way - be aware of that for something like an ETF, the biggest amount of capital gains (or loss) is from a sell transaction. There can also be a much smaller amount of capital gains from income paid and the final capital gain can be affected by return of capital (RoC) being paid. 

The portion classed as capital gains is taxed by Canada in a taxable account as a capital gain in the year the $$ are received. I would assume that since it is classed by the ETF company as capital gain, the UK would want it reported as the same. 

The portion that is RoC is subtracted from the cost base so that Canada doesn't tax it in the year being paid but when selling, the capital gain is larger (ex. cost was $1000, $200 of RoC was paid before selling means when selling, the cost is $1000 - $200 = $800 which increases the capital gain by $200).


Another key question for ETFs is a Canadian based one can have phantom distributions. The main place to find out about these are the ETF company's web site. The issue for the investor is that the capital gains get recorded on the T3 form but nothing separates run of the mill capital gains form cash paid versus this type where no cash was paid.
https://www.theglobeandmail.com/glo...by-phantom-etf-distributions/article18225076/




mike_302 said:


> ... Some actions are dividends and some are dividend reinvestments (*and I'm not sure how I count these up to identify taxable gains*); I didn't sell any funds in the last UK tax year, but that will be an added challenge next year;


I can see where the UK not recognising the TFSA as tax free adds to the number of investments to work out the numbers for but as you say you have a taxable account, haven't you had to do this type of calculations for the taxable account?


Dividends in the TFSA will be Canadian tax free so there won't be any Canadian dividend withholding tax and no "foreign tax paid" to report on the UK tax return. It would strictly be whatever the UK does to tax Canadian company dividends.

Dividend re-investment in the TFSA is the same as buying more stock/units because you liked the price. The difference is the investor does not pick the price and does not pay a buy commission. Either way, more shares/units have been bought with $$$ spent so that the total cost has changed, requiring an update. 

Where the cash paid that is re-invested *is* 100% dividends (ex. BNS common stock), the new shares as well the cost have to be added to what already exists. The calculations can be done pretty much as they happen.

ETFs can be trickier as one knows $10 bought 2 units at $17 from the transaction line for say May 2017. The issue is that until the tax breakdown is published after Feb 2018, one won't know that for the total $10 that was re-invested, the breakdown is $8 is an increase to the cost for the two additional units while $2 is RoC that is reducing the cost (net of a $6 increase). And that's without confirming if a phantom distribution that is also increasing the cost base was paid.


I know there's a lot of moving parts to check for but if you take your time to learn it - the checking/math end up being more tedious than challenging. Especially if one has setup a spreadsheet to automate some of the calculations.


Some don't like doing this so they either hire an accountant. Others will use a web site like https://www.adjustedcostbase.ca/ to ease the calculation burden.




mike_302 said:


> ... the full dividend is credited to me and then a second activity debits by account for 15% of the full dividend amount. *Actually, I thought the withholding tax should've been 25%... So I'm not sure why I'm only being debited 15%... But I will happily accept it.*


I believe it is because of the Canada - UK tax treaty. The 25% is the full withholding tax for a Canadian NR where no tax treaty exists. The tax treaty reduces it to 15%. 

A similar thing happens for a Canadian buying US dividend paying stock. The full US withholding rate for a US NR is 30% but by filing the paperwork to show one is a Canadian, the US - Canada tax treaty reduces the 30% to 15% in a taxable account and in an RRSP, waives the US withholding tax completely. 




mike_302 said:


> ... so it's better than in Canada in that sense. However, I have been doing this whole tax sorting exercise for absolutely far too long now, and I just want to wrap it up. That said, I still think an accountant would be a rip off because I would still need to collect all these numbers and understand them before handing them to an accountant who would do the easy part... If I just handed an accountant the Questrade activities excel spreadsheet, they'd probably do my taxes and tell me it took 5 hours * $1000/hour...


If the calculations took five hours, I believe there would be extra time added for figuring out if the ETF cash payments included capital gains, RoC that reduces the cost and phantom distributions that increase the cost.

You might want to compare a run through of one of the TFSA ETFs (or if there is a common stock, start with the simple version of calculating the cost base). Different brokers have been making progress at getting their cost calculations more accurate for the "cost" or "book value" column. For my broker, the REIT bought 10 years ago has a cost that is wrong due to missing years worth of RoC. REITs/ETFs bought in the last five year or so, are correct for RoC so only variation I have to check for is whether phantom distributions for a Canadian ETF have been paid out while I owned the ETF.



Cheers


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## mike_302

Nearly another year, and a bunch more learning as a Canadian expat in the UK.

I'm now preparing my tax filing for the UK revenue and customs agency and need to figure out how to account for a capital gain on a Canadian stock.

I've learned that the UK requires funds to be registered to the UK authority (a 'reporting fund') in order for my capital gains on the fund to be classed as Capital Gains (and therefore, eligible for the UK's capital gains allowance of £11K). Sadly, my funds are not 'reporting funds' and therefore the capital gains from my dispossession of the funds are going to be seen entirely as standard income. Since I am employed too, I'll be paying tax at my standard income tax bracket -- similar to how I would have done in Canada, except capital gains tax only applies to 50% of the gains in Canada! Boo... To make matters worse, the UK revenue agency doesn't recognise capital losses on funds that aren't 'reporting', so I can't even count those against capital gains to reduce tax owed.

This raises a really big question that I've searched for an answer for in Andrew Hallam's book (Millionaire Teacher Millionaire Expat) but come up disappointed. As an expat with an indefinite future (likely UK for a while; could be anywhere later) what is the best way to maintain a Couch Potato-like portfolio in Canada? I'm particularly motivated for an answer because my couch potato portfolio is sitting untouched, unbalanced, and I can't re balance it because it would be a taxable disaster -- tax owed on the gains, and no relief from the losses...

Any Andrew Hallam fans here? Or anyone know what the right answer is?


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## luckyone

mike_302 said:


> Nearly another year, and a bunch more learning as a Canadian expat in the UK.
> 
> I'm now preparing my tax filing for the UK revenue and customs agency and need to figure out how to account for a capital gain on a Canadian stock.
> 
> I've learned that the UK requires funds to be registered to the UK authority (a 'reporting fund') in order for my capital gains on the fund to be classed as Capital Gains (and therefore, eligible for the UK's capital gains allowance of £11K). Sadly, my funds are not 'reporting funds' and therefore the capital gains from my dispossession of the funds are going to be seen entirely as standard income. Since I am employed too, I'll be paying tax at my standard income tax bracket -- similar to how I would have done in Canada, except capital gains tax only applies to 50% of the gains in Canada! Boo... To make matters worse, the UK revenue agency doesn't recognise capital losses on funds that aren't 'reporting', so I can't even count those against capital gains to reduce tax owed.
> 
> This raises a really big question that I've searched for an answer for in Andrew Hallam's book (Millionaire Teacher Millionaire Expat) but come up disappointed. As an expat with an indefinite future (likely UK for a while; could be anywhere later) what is the best way to maintain a Couch Potato-like portfolio in Canada? I'm particularly motivated for an answer because my couch potato portfolio is sitting untouched, unbalanced, and I can't re balance it because it would be a taxable disaster -- tax owed on the gains, and no relief from the losses...
> 
> Any Andrew Hallam fans here? Or anyone know what the right answer is?


I doubt I've got an answer but I'll attach a couple of links that may assist?

http://www.ey.com/Publication/vwLUAssets/ey-uk-reporting-fund-status/$FILE/ey-uk-reporting-fund-status.pdf

You may also be aware of the list published by HMRC that details all the reporting funds? I've attempted to see/ask in the past if any of these funds are available to purchase in Canada, thereby allowing the tax treatment in the UK to be more acceptable. Best of luck with finding any (if indeed that's what you're looking for?)

https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

Best of luck mate


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## mike_302

luckyone said:


> I doubt I've got an answer but I'll attach a couple of links that may assist?
> 
> http://www.ey.com/Publication/vwLUAssets/ey-uk-reporting-fund-status/$FILE/ey-uk-reporting-fund-status.pdf
> 
> You may also be aware of the list published by HMRC that details all the reporting funds? I've attempted to see/ask in the past if any of these funds are available to purchase in Canada, thereby allowing the tax treatment in the UK to be more acceptable. Best of luck with finding any (if indeed that's what you're looking for?)
> 
> https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds
> 
> Best of luck mate


Thanks a bunch.

I had read the PDF before -- it was quite helpful in understanding where I stand.

Also, I've downloaded that list of reporting funds. Have provided to Wealth Bar, a roboadvisor in Canada that advertises itself to expat Canadians, as their best option in Canada. They're looking into what they can do now.

Still, the question remains for anyone that thinks they know Andrew Hallam's books inside and out:
What to do with your savings / investments while you are out of the country indefinitely, particularly in the UK? These capital gains taxes are going to be an absolute killer, particularly given all of the gains will be taxed (not just 50% as it is in Canada), and because my capital losses don't help me at all... So all of the "couch potato, re balancing" advice becomes useless to me.


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