When to declare residency for capital gains tax purposes
Jan 22nd 2018, 9:33 am
#1
Phaedrus by Plato (not5)
Thread Starter
Joined: May 2017
Location: Vernon, BC
Posts: 206
When to declare residency for capital gains tax purposes
This is really a question about capital gains tax rules in BC vs. the UK. Before I get to my question, here's some relevant background info;
My last day at my UK job is 13th Feb.
I fly from the UK on 14th Feb
I start my new job in BC on 19th Feb.
I have a four week orientation during which time my family are remaining in the UK, then I fly back to the UK for 2 weeks and we all fly out together to BC for good at the end of March.
Hopefully (fingers crossed) our UK house sale will complete on 1st April.
My intention is to inform HMRC and the Canadian equivalent that for tax purposes I am a resident of Canada (BC) from 14th Feb 2018. So when our house completes the money we make on it will come to me as a Canadian Resident and tax payer. I know in the UK that as our only property and primary residence that we WOULD NOT pay any capital gains tax on the house sale. But are the rules the same in Canada? So basically when our house sells (our only house and primary residence) the money we make on it, which we will be using to put a deposit on a house purchase in BC, as a UK tax payer we wouldn't have to pay capital gains tax, but as a Canadian Resident would we have to? (hopefully not....!!)
My last day at my UK job is 13th Feb.
I fly from the UK on 14th Feb
I start my new job in BC on 19th Feb.
I have a four week orientation during which time my family are remaining in the UK, then I fly back to the UK for 2 weeks and we all fly out together to BC for good at the end of March.
Hopefully (fingers crossed) our UK house sale will complete on 1st April.
My intention is to inform HMRC and the Canadian equivalent that for tax purposes I am a resident of Canada (BC) from 14th Feb 2018. So when our house completes the money we make on it will come to me as a Canadian Resident and tax payer. I know in the UK that as our only property and primary residence that we WOULD NOT pay any capital gains tax on the house sale. But are the rules the same in Canada? So basically when our house sells (our only house and primary residence) the money we make on it, which we will be using to put a deposit on a house purchase in BC, as a UK tax payer we wouldn't have to pay capital gains tax, but as a Canadian Resident would we have to? (hopefully not....!!)
Jan 22nd 2018, 1:13 pm
#2
BE Enthusiast
Joined: Dec 2016
Location: St Catharines, Ontario From Bournemouth UK
Posts: 417
Re: When to declare residency for capital gains tax purposes
You will be considered tax resident in the UK until 5th April 2018, as you have lived in the UK for more than 183 days. You will also be considered tax resident in Canada for 2018 as you will be present for more than 183 days. Canada tax year is calendar based. The UK tax year is from 6th April through to 5th April the following year.
Subject to exchange rates, it may be better to declare your start date as 1st April, if the £ increases against the $ and vice versa if the £ falls over the few weeks you are in Canada. Any difference in the exchange rate and the day you sell your property would be consider a capital gain according to the CRA.
e.g. Residence established on 14th Feb £1=$1.73 House = £300,000 = $519,000
House sells for £300,000 on 1st April £1=$1.77 = $531,000
You will have to pay Capital gains on the $12,000 profit if you residence starts on 14th Feb, but nothing of you residence starts on 1st April.
It doesn't work in reverse, you can not claim on any loss.
e.g. £1=$1.67 = $501,000 , a loss of $18,000
Quick question, do you have your documents to allow you to fly back on 1st April. i.e. If you are a PR, your PR card will take 61 days to process and you will need to get a PRTD for your 2nd trip back to Canada. PRTD takes 5 working days and costs $50
Subject to exchange rates, it may be better to declare your start date as 1st April, if the £ increases against the $ and vice versa if the £ falls over the few weeks you are in Canada. Any difference in the exchange rate and the day you sell your property would be consider a capital gain according to the CRA.
e.g. Residence established on 14th Feb £1=$1.73 House = £300,000 = $519,000
House sells for £300,000 on 1st April £1=$1.77 = $531,000
You will have to pay Capital gains on the $12,000 profit if you residence starts on 14th Feb, but nothing of you residence starts on 1st April.
It doesn't work in reverse, you can not claim on any loss.
e.g. £1=$1.67 = $501,000 , a loss of $18,000
Quick question, do you have your documents to allow you to fly back on 1st April. i.e. If you are a PR, your PR card will take 61 days to process and you will need to get a PRTD for your 2nd trip back to Canada. PRTD takes 5 working days and costs $50
Jan 22nd 2018, 1:46 pm
#3
Phaedrus by Plato (not5)
Thread Starter
Joined: May 2017
Location: Vernon, BC
Posts: 206
Re: When to declare residency for capital gains tax purposes
You will be considered tax resident in the UK until 5th April 2018, as you have lived in the UK for more than 183 days. You will also be considered tax resident in Canada for 2018 as you will be present for more than 183 days. Canada tax year is calendar based. The UK tax year is from 6th April through to 5th April the following year.
Subject to exchange rates, it may be better to declare your start date as 1st April, if the £ increases against the $ and vice versa if the £ falls over the few weeks you are in Canada. Any difference in the exchange rate and the day you sell your property would be consider a capital gain according to the CRA.
e.g. Residence established on 14th Feb £1=$1.73 House = £300,000 = $519,000
House sells for £300,000 on 1st April £1=$1.77 = $531,000
You will have to pay Capital gains on the $12,000 profit if you residence starts on 14th Feb, but nothing of you residence starts on 1st April.
It doesn't work in reverse, you can not claim on any loss.
e.g. £1=$1.67 = $501,000 , a loss of $18,000
Quick question, do you have your documents to allow you to fly back on 1st April. i.e. If you are a PR, your PR card will take 61 days to process and you will need to get a PRTD for your 2nd trip back to Canada. PRTD takes 5 working days and costs $50
Subject to exchange rates, it may be better to declare your start date as 1st April, if the £ increases against the $ and vice versa if the £ falls over the few weeks you are in Canada. Any difference in the exchange rate and the day you sell your property would be consider a capital gain according to the CRA.
e.g. Residence established on 14th Feb £1=$1.73 House = £300,000 = $519,000
House sells for £300,000 on 1st April £1=$1.77 = $531,000
You will have to pay Capital gains on the $12,000 profit if you residence starts on 14th Feb, but nothing of you residence starts on 1st April.
It doesn't work in reverse, you can not claim on any loss.
e.g. £1=$1.67 = $501,000 , a loss of $18,000
Quick question, do you have your documents to allow you to fly back on 1st April. i.e. If you are a PR, your PR card will take 61 days to process and you will need to get a PRTD for your 2nd trip back to Canada. PRTD takes 5 working days and costs $50
With regard the PR, no problem there I landed last summer and already have my PR card
Jan 22nd 2018, 3:24 pm
#4
Joined: Sep 2008
Posts: 12,830
Re: When to declare residency for capital gains tax purposes
How do you 'declare a start date'?
A start date is when you start. The OP will be tax resident from February 15 2018, it is not a choice. It won't be a secret from CRA, they will have a SIN, and payroll deductions, reported to CRA from that date.
Adjusting dates to suit ones preferred tax status is not an option and not a good way to start residency. The OP is unlikely to incur CGT on the sale of their primary residence in that short period. However, as stated, any currency gains are subject to reporting and possibly CGT (50% of any gain is taxable).
This is wrong. Capital losses can be carried forward to future years and offset against capital gains.
Tax evasion is not a good way to start life in a new country.
A start date is when you start. The OP will be tax resident from February 15 2018, it is not a choice. It won't be a secret from CRA, they will have a SIN, and payroll deductions, reported to CRA from that date.
Adjusting dates to suit ones preferred tax status is not an option and not a good way to start residency. The OP is unlikely to incur CGT on the sale of their primary residence in that short period. However, as stated, any currency gains are subject to reporting and possibly CGT (50% of any gain is taxable).
It doesn't work in reverse, you can not claim on any loss.
e.g. £1=$1.67 = $501,000 , a loss of $18,000
e.g. £1=$1.67 = $501,000 , a loss of $18,000
Tax evasion is not a good way to start life in a new country.
Last edited by Aviator; Jan 22nd 2018 at 3:46 pm.
Jan 22nd 2018, 3:25 pm
#5
Joined: Sep 2008
Posts: 12,830
Re: When to declare residency for capital gains tax purposes
https://www.canada.ca/en/revenue-age...cy-status.html
Jan 22nd 2018, 3:28 pm
#6
Phaedrus by Plato (not5)
Thread Starter
Joined: May 2017
Location: Vernon, BC
Posts: 206
Re: When to declare residency for capital gains tax purposes
Make sure you are not already deemed a tax resident.
https://www.canada.ca/en/revenue-age...cy-status.html
https://www.canada.ca/en/revenue-age...cy-status.html
Jan 22nd 2018, 3:44 pm
#7
Joined: Sep 2008
Posts: 12,830
Re: When to declare residency for capital gains tax purposes
Thanks Aviator and all good points. Definitely not a tax resident yet having absolutely nothing in Canada yet and my wife and dependant still in the UK with me. We simply had a holiday booked for last summer but my COPR arrived earlier than expected so 'Landed' when we arrived in the summer but haven't go anything set up there until I arrive next month.
We have tax preparers and accountants. I would go to an accountant over a tax preparer.
