abrxx

Thanks for the advice Steve. The problem is that I am in a contractual arrangement and simply cannot change the entity that is billing the client. So my UK Ltd company must continue to bill for services that it has contracted to supply.

Thanks,
Alastair

Aviator

Another issue is CRA don't tell you when and how much to pay by installments. They let you file and pay annually in the first year, then you have to figure out if you need to pay by installments and how much each installment should be, dividing the previous years taxes by 4 if paying quarterly. When ones queries the nonsense of this, the answer it that it is in the tax act it is up to the tax payer or their representative to figure it out.

Aviator

You don't need to change it and it is not a problem for CRA. Your company is registered in the UK has tax liability there and pays corp tax in the UK. You are responsible for reporting your personal income, not corporate. Any wages the company pays you should be gross (no source deductions in the UK). You report this to CRA on your CAD return as income. If you company pays you dividends, you report this as such to CRA here as well. So long as you have done this by April 30 each year all is good. If your have self employment income, June 15, although tax owed should be paid by April 30 to avoid interest.

You are an employee of the company in the UK and not self employed, you are also a shareholder of the company. Your arrangement is very straightforward and I cannot see any reason why you would want to change it.

An alternative, would be to be a contractor to the company in the UK. Bill them your fee, get tax breaks on expenses, register for GST if you pay enough to make it worthwhile reclaiming the ITC (if your income is over $35k you have to register). If there is no tax benefit, leave it as it ease, so long as you report and pay taxes, CRA don't care.

Shirtback

Too true, & good points.

S

abrxx

Thanks Aviator, that makes sense. As a director of my Ltd company I couldn't also be an external contractor, but otherwise this all makes sense. I just declare to CRA my UK dividend income, and all should be fine.

JonboyE

You can pay yourself director's fees and they are only taxable in the UK if your directing work was done in the UK.

Dividends work fine as well. Check paragraph 3 (b) of article 10 of the Canada/UK tax treaty.

Steve_

And is the OP invoicing less than $35,000? It would be a very small business if that were the case. But anyway as I pointed out the last time you said this, that is a meaningless exception because you'd have to be completely mad not to apply for a GST account because you can claim input tax credits if you do.

Typically speaking, you do have to register as a self-employed person or at least tell the CRA you are one, you're just arguing semantics every time this subject comes up and it's not helpful to the people posting.

You tell the CRA you are self-employed. You get a business number. You apply for GST/HST registration. You collect and remit GST/HST. You file a T2125 with your T1. You pay income taxes in quarterly installments. This is how it is done, in a paragraph.

Steve_

You're talking about requirements, I'm talking about the actual best way of doing it, this an advice forum! Hey, if you want to pay all the GST/HST on all the stuff you buy to run your small business, you go right ahead...

The only difference living in another province makes is that it might have PST as well, so you may need to register for a PST account, but that isn't relevant to the OP's query because it's about export of services, which by definition are not subject to PST.

Steve_

I don't agree with what Aviator said above, having a UK corporation when you are effectively the only employee and you live in a different country is pretty complicated and makes no sense.

You've got to have a Canadian payroll to pay yourself, it makes no sense to set up a Canadian payroll for some tiny UK corporation, it's just going to cause all kinds of problems because for example no accountant will be familiar with that setup in either country. Also you've got possible currency conversion issues, because you'd have to use pounds on the T4 for example. Plus HMRC will wonder what is going on no doubt as well.

Simplest thing to do is to either register as self-employed here, or if you really really want to (and I don't recommend it if you've only got one client) is to set up a corporation here and setup a payroll for it.

I can't see that making a minor change to the contract with your client is any big deal. Invoicing them in Canadian dollars might, but it's easier to invoice them in pounds and then record the income in CAD on your financials than it would be to try and have a UK corporation run a Canadian payroll for one person. You wouldn't even need a payroll if you were self-employed.

(And before anyone says she could pay herself using dividends from the UK corporation, that makes no sense either because a salary is an expense to a corporation, i.e. reduces corporation tax, whereas dividends do not).

Aviator

I would agree with you, but then we'd both be wrong!

Shirtback

Yes, I was talking about requirements, in response to the OP. The UK corporate entity came up later down the thread, & as I know nothing about how that factors into the equation, I haven't & won't comment on that.

The "actual best way of doing it" depends, IMO, & that of my friendly tax advisor, depends on the business. What's best for you & your business, might not be relevant to me & mine .

Pedant mode: Being registered as a business/self-employed, & being registered for GST/PST/HST aren't quite the same thing ... /pedant mode.

I purchase so little to function as self-employed, that GST/HST/PST offsets aren't worth my billable time to reclaim 'em. Now, if coffee were deductible, I'd be all over that !

I do enjoy reading different perspectives, experiences & expertise.



S

Going Coastal

Hi all,

My husband is in a similar-ish situation and we're getting very confused:

He's already sent in his P85 because he expected to eventually get paid and pay taxes in CDN. He has his PR.

The company he worked for in the UK has not yet found a replacement for him and as he worked there for 8 years, he's got a lot of knowledge. A few previous colleagues have wanted to ask him questions.

He has registered with the contracting company (in the UK) that his previous employer uses. They want to pay him in GBP into his old UK bank account, but will deduct NI at the full rate and maybe income tax as well.

Has anyone else had a similar situation? Can he claim back any NI contributions or taxes?

I know there's a "reciprocal tax agreement" but this set up makes us think it'll still be targeted for Canadian taxes when brought into our account here and it'll be a double whammy.

Thanks!

abrxx

If they are deducting NI and income tax then your husband is being treated as an employee of that organisation. I can't see any way around that. If he is a contractor, then he will invoice the firm and receive a business income, out of which it is his responsibility to pay all the relevant taxes. I don't see any middle ground here.

Thanks,
Alastair

abrxx

Without revealing my client's details, I can assure you I cannot make any contractual changes with regard to service delivery. All manner of vetting and security clearance is needed, and that cannot be arbitrarily changed at my whim. So I am stuck with my UK ltd company for the time being. Given that, I cannot see any advantage to registering as self employed in Canada. My Canadian business would do nothing and have no income.

Again, it seems to me that the clearest thing from a personal POV is to simply declare my UK dividend income to the Canadians, and be done with it. What's wrong with this approach?

Thanks,
Alastair