celtic uk canadian

Hi,

I am new here in this forum, and have a specific question. It's not directly a question about immigration, but closely related to it.

To my background: I am a Canadian, but having lived in the UK for many, many years, I naturally haven't paid any taxes in Canada for more than quite a while and clearly haven't lived there for more than 7 years.

My question is rather a tax-question: I have a property in the UK to sell, the money out of that sale would be a financial basis for a new beginning in Canada. - eventually a down payment for a property in Canada.

Various websites speak about preparing an "inventory list" (which I already have), and a declaration on bringing money into Canada ( can't find any forms for that...), but I am not sure, if Revenue Canada would be interested (as in "wanting me to pay taxes" ) in the sale of my property as part of my move to Canada?

Would they ask for this amount to be taxed?
After all, I'd be bringing in around CAD 450 to 500 K. (Upon taking my mortgage, Revenue Canada will most likely see that by my SIN number)

As the move is purely a move back, not a foreign income from the UK of a Canadian living within Canada, I guess I wouldn't have to pay taxes on it?

Anybody been in this situation before?

iaink

Welcome to BE.

If its your primary residence you are selling and you sell it before you move to canada than it should be immune from capital gains tax, which as far as I know is the only tax that would apply. If you sit on the funds and move them later on when the exchange rate seems better, then there are tax implications to that.

Really you should post this one (or have a mod move it) to the main Canada area, where one of the tax bods (JonBoyE) might see it.

If you move back to canada before you sell then things get more complicated because you might be deemed to have more than one residence (so capital gains would apply to the UK sale), plus there are tax implications to changes in the exchange rate between when it sells and when you move the money over.

The money reporting form only applies to cash (or similar) funds over $10k brought into canada in person. Its a money laundering thing and nothing to do with tax. If its a bank wire transfer then the bank deals with the reporting.

celtic uk canadian

I sorry, but I am not able to move the thread to a different folder.

The thing is, that I will move back to Canada first, then put the house up for sale. The property is not exactly in an area of the UK where it gained any value, and I might be lucky if I get my asking price.

To me it would be a disaster if I was faced with an unexpected bill from Revenue Canada, it would as a matter of fact, put my whole move back to Canada in jeopardy. This is why I am looking for answers to this, plus nowhere on the internet there are answers to be found. I would also be surprised, if I was the only one ever faced with this issue.

Also the items on the inventory list, would come a bit later, as "goods to follow".

iaink

There are a few threads here regarding CGT I think and others regarding exchange gains. From what you say as long as you can document the value of the property before and after you will be alright.

Recording the exchange rate on the day of the sale and when the money transferred over will help come tax assessment time.
The bit I'm not sure on is if CGT would even apply if this is your only property, assuming you rent in Canada at first. I dont think it will so just the exchange thing to figure out.

iaink

Capital Gains Tax-Canada : British Expat Wiki

http://britishexpats.com/wiki/Curren..._Losses-Canada

iaink

The inventory list is your goods to follow list. It prevents you paying tax on your own stuff . There's a wiki for that too.

http://britishexpats.com/wiki/Goods_To_Follow-Canada

celtic uk canadian

Thanks for posting the links, however, I don't really seem to find the answers I am looking for.

The links don't really show a difference between "goods" and "assets", by goods meaning items, by "assets" meaning financial support for my new beginning in Canada.

Overall, it sounds like I would have to pay taxes to Revenue Canada on assets which I built up myself over the years in the UK? Once the property in the UK is sold, Revenue Canada would treat it as an income, and ask for tax to be paid on the amount I would receive via the sale.

Since I bought the UK property by myself, paid for the property myself, after having paid taxes to the UK, that would mean to me that I'd would have to pay taxes twice? - once to the UK, and then later on to Revenue Canada? To me it's still one and the same asset.

I guess that would make my move back to Canada most likely impossible, at least from a financial perspective.

And, no, unfortunately, there is no accountant I can ask here in the UK to get a clear answer on this.

christmasoompa

A Canadian accountant would be the person to ask surely?

I'll amend your thread title for you so it's more specific, that way our lovely tax pros will hopefully see it and be able to advise.

HTH.

iaink

You dont owe tax on what you built up in the UK. Taxes (if any) will apply only to any changes to your assets value after you resume Canadian residency.

feelbritish

On a side note, hope you have your British citizenship as well

JonboyE

To the OP. You are tax resident in the UK at the moment? It seems so. If you move back to Canada you will become a tax-resident here. From that day forward the CRA have a claim on any income or gains you make anywhere in the world. Before that day your pound of flesh belongs to HMRC.

Before you move have your UK property (real estate and any other) valued. Keep the written valuation(s) as you may need them. Your tax cost in Canada is this value converted at the exchange rate at the time. When you come to sell them, if the proceeds in Canadian dollars are more that your tax cost then you will have a capital gain of proceeds received less tax cost. If you receive less than your tax cost then there is no gain. You will only pay tax in Canada on gains that accrue after you have re-established residency in Canada. From what you say this is likely to be zero.

On an internet forum we can only give generalized advice based on very limited information. If tax consequences could be "disastrous" then you need individualized professional advice.

celtic uk canadian

Thanks for the answer. It was really helpful and your explanation sounds plausible. And yes, I am tax resident in the UK, paying to HMRC, I haven't dealt with Revenue Canada for more than a while.

So basically, I would only have to pay taxes on possible capital gains from the day onward I became a tax resident in Canada, not before that.

If there are no capital gains on a possible sale, after becoming a tax resident in Canada, (backed up by a valuation, shortly prior to coming to Canada) than I could expect to have the whole amount of the sale of the property for my start in Canada.

If that is so, than everything should be fine.

Only if I would later on (after having become a tax resident in Canada) sell the property at a higher price than the valuation, then I would be liable to pay taxes to Revenue Canada.

Further questions: Is the valuation of the property to be shown upon arrival in Canada to an officer, - together with the "inventory or goods to follow list"? or is the valuation of the property directly to be sent to Revenue Canada?

At the moment, I still have a bank account in Canada, with a Canadian bank. Is it possible to transfer some of my money from my UK account to Canada? I'd say, yes, and again, taxes would start to apply once I become a tax resident?

:-)

JonboyE

Yes to the above.

No, it is real estate - it is not following you.

Not yet. Just keep it. The CRA will ask if they want to see it.

Yes it is possible. However, any interest is Canadian sourced income paid to a non-resident and potentially subject to non-resident withholding tax. The Treaty restricts the withholding tax to 10%. Any interest is also taxable in the UK as long as you are resident there. You would need to report it on a UK tax return and claim a foreign tax credit for the Canadian withholding tax.

In other words, unless you have a specific reason for having cash in your Canadian bank account I would wait until a few days before you move back and/or transfer the money to a non-interest bearing chequing account. I just keeps thing simpler.

celtic uk canadian

Thanks for the answers.

No, it won't, at least not physically, but the financial assets resulting out of the sale. It would be the basis for a new beginning, this is why this is so important to me, and why I am asking so many questions about that.....

To me it's only important, that the financial assets are mine and mine only, only the interest on it would be something for Revenue Canada.

When would they ask? or find out? If a large amount gets transferred into my Canadian bank account? - the bank has my SIN number, thus I guess Revenue Canada can see it coming in?


Scenario 1:

I would only consider a transfer before becoming a Canadian tax resident to be "securing" a certain conversion rate. I recall 2.1, however, now it's gone down to 1.75.

Scenario 2:

If I should leave the amount in the British account for a while, after having become a Canadian tax resident, I'd have to declare any interest on this amount to Revenue Canada, not HMRC.

iaink

They dont care about taxing the assets, they care only about any change in its value, in $Cdn, after you take up residency When you fill out your tax return, should there be a capital gain you should report it. The banks are obliged to inform the government about transfers above a certain level, but that is to do with money laundering laws, nothing to do with taxation. If they choose to audit you, you will need the documentation. In scenario 1 that money starts to garner interest in Canada, that complicates things.
In scenario 2 interest earned would count as income on your canadian tax return. When you leave the UK you should fill out the HMRC P85 form to declare non residency at which point interest should not be liable for UK taxes.

You cant escape the taxes on interest gains, its just a question of who you pay and keeping track of the credits so you only pay it once. The more grey areas you can avoid the better and the less likely you are going to be paying an accountant to sort it out for you.

For a complicated situation its worth hiring an accountant to sort it out, but this isnt really complicated, many of the people here sold UK assets, transferred money and figured out the tax situation, the fact you are a returning citizen rather then a new permanent resident makes no difference to the tax situation. Compared to US citizens the Canadians and Brits get it easy.