Go Back   British Expats / Living & Moving Abroad / Canada

Reply
 
Thread Tools
Old May 17th 2017, 5:56 pm   #1
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Thumbs up READ ME. PENSION RULES UK to Canada

This is a very important message to those of you who have immigrated to Canada and after the event drawn a UK Pension which allowed for a Tax Free Lump Sum ( in the UK )

As you are Tax Resident in Canada you have to declare all worldwide income to CRA and pay tax accordingly.

My husband was in the position of receiving a Tax Free Lump sum. We nearly had a heart attack when we had to report this amount on our Canada Tax Returns. We were given a bill for nearly $40k.

This does not apply to your monthly income from a Pension.....sadly that is taxable in Canada as Worldwide Income

I know from reading articles here that many of you have paid the tax on this lump sum in Canada.

If that is the case you should be entitled to a REFUND because you are not permitted by HMRC to draw more than 25% of your crystalisation amount as a lump sum. In other words your total Pension Pot. SO...under the Tax Treaty with the UK this is also TAX Free In CANADA up to 25%.

What you need to do is to go back to your pension provider and request a letter clearly stating that under HMRC rules you were not permitted to take more than 25% as a Tax Free Lump Sum. That the amount you received as your lump sum was under that Percentage. You then need to go back to CRA and tell them that you want a refund as you have wrongly paid tax on this amount.

We have this on first hand knowledge having challenged why Canada thought they had any claim on a Pension which was paid into over many years in the UK. That it had nothing whatsoever to do with Canada and that it was simply robbing a pension pot from someone who was trying to settle and needed every penny in order to do so. That is was totally perverse and clearly not right by any standards.

I want to wish you all well in the challenge. If you have any other questions please feel free to PM me
I hope I have cheered some of you up. Have a great day
Stef
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit

Last edited by lins and Stef McLachlan; May 17th 2017 at 6:30 pm. Reason: Typo and additional info
lins and Stef McLachlan is offline   Reply With Quote
Old May 17th 2017, 7:15 pm   #2
bats 
limey party pooper
 
Joined: Jul 2012
Posts: 8,884
bats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond reputebats has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

That is good news. I don't understand why it's tax free in Canada but I'll go along with it.
bats is offline   Reply With Quote
Old May 17th 2017, 7:37 pm   #3
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Quote:
Originally Posted by bats View Post
That is good news. I don't understand why it's tax free in Canada but I'll go along with it.
Because it is less than 25% of your entire pension pot. I was prepared to go to Tax Court to explain why I thought the decision to Tax was not correct.

I know from reading posts on here that Canadas coffers have been swelled by bagging us immigrants and not justly so. A lot of people took this at face value and paid up. Fortunately I was not in any position to do that, so I dug deeper.

This was the answer I got from the CRA this morning and I told him that I was posting this online. He replied that their motto was to not take a penny more than they were entitled to. He told me that we supplied the documents needed so that is why I have told people to get the letters from their oension provider.
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit
lins and Stef McLachlan is offline   Reply With Quote
Old May 17th 2017, 9:36 pm   #4
BexB Male
Forum Regular
 
Joined: Apr 2013
Location: Maple Ridge, Vancouver
Posts: 107
BexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond reputeBexB has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Thanks for the heads-up. Could I just clarify a few points with an example?

Let's assume you have a UK pension pot of 1,000 and decide to draw down 400, made up of 100 25% tax-free lump sum and 300 taxable "pension". So you are not taking the whole pot.

In my 2016 Canadian tax return, I declared income of 400 and the tax due was offset by the tax I paid in the UK on the 300.

(1) Is the 100 definitely not taxable in Canada (I assumed all income was)?
(2) If it is not, what are the tax return mechanics:
(a) should only 300 be declared as income (even though, if CRA checks, the amount is 400)?
(b) if 400 is declared as income, where/how do you cover off the 100?

Thanks again.
BexB is offline   Reply With Quote
Old May 18th 2017, 2:06 am   #5
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Quote:
Originally Posted by BexB View Post
Thanks for the heads-up. Could I just clarify a few points with an example?

Let's assume you have a UK pension pot of 1,000 and decide to draw down 400, made up of 100 25% tax-free lump sum and 300 taxable "pension". So you are not taking the whole pot.

In my 2016 Canadian tax return, I declared income of 400 and the tax due was offset by the tax I paid in the UK on the 300.

(1) Is the 100 definitely not taxable in Canada (I assumed all income was)?
(2) If it is not, what are the tax return mechanics:
(a) should only 300 be declared as income (even though, if CRA checks, the amount is 400)?
(b) if 400 is declared as income, where/how do you cover off the 100?

Thanks again.
No, you appear to be talking about your regular monthly pension income. This is wholly taxable as worldwide income here in Canada if you are tax resident in Canada. You should not be paying Tax in the Uk on this income unless you are actually Tax resident still in the Uk.

The Tax Treaty between UK and Canada means that you wont be charged tax in both places as there is an indemnity on double taxation. That purely depends on where you are Tax resident.....thats my understanding and I am not an expert on the ins and outs of this as it doesn't apply to us.

What I am talking about if you have a non state pension and when that pension became due for drawdown, that you were offered and took advantage of a large sum of money as a commutated portion of your pension pot. In the UK that lump sum is TAX FREE and I have since found out that if the lump sum is up to 25% of your overall pension pot, then it is also Tax Free in Canada.

In real terms that means if you have a pension pot of £1 million, then you could be offered up to £250k as a Tax free lump sum......ie up to 25%.

A lot of people declared their lump sum as worldwide income and was taxed on that sum, they are the ones this note is for, so they can try to get their money back from CRA.

I hope this makes sense to you now. I only know what I know because we have been going through this ourselves....it nearly gave me a heart attack.
Regards
Stef
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit
lins and Stef McLachlan is offline   Reply With Quote
Old May 18th 2017, 2:33 am   #6
Binned by Muderators
 
Joined: Jul 2007
Location: White Rock BC
Posts: 11,633
JonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Quote:
Originally Posted by lins and Stef McLachlan View Post
...
What I am talking about if you have a non state pension and when that pension became due for drawdown, that you were offered and took advantage of a large sum of money as a commutated portion of your pension pot. In the UK that lump sum is TAX FREE and I have since found out that if the lump sum is up to 25% of your overall pension pot, then it is also Tax Free in Canada.
Do you have a reference to support this? I would love to be wrong, but I can't find anything in the tax treaty that says so.
__________________
Any reference to tax above is for general interest only and is not intended as professional advice.
JonboyE is offline   Reply With Quote
Old May 18th 2017, 2:56 am   #7
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

i have been advised directly by the manager overseeing my appeal that this is the case. I have not read the treaty, just been quoted various bits as they have related to our case. I got suspicious that the taking of tax by Canada on Tax free lump sums from the UK was not right.
Afterall, you can inherit money from a source outside Canada as long as the death duties have been paid already in that country....so Tax Feee in Canada

Also if you win on the lotto....that is Tax free for the winnings....you only pay tax on interest earned by the lump sum......,so tax free.

It just did not ring correct that Canada should think it was okay to rob a persons pension in this way especially in view of the fact that it was not connected to Canada in any way......not earned here etc

I also looked at whether the practice could be deemed to be discriminatory in as much as.....if we had not come here to Canada, it would have been tax free, so we have suffered a detriment because we immigrated here.

All of these are wholly logical reasons why we would have been willing to stand up in front of a judge at Tax Court and explain why CRA erred in trying to take tax from our pension.

As it turned out, we were asked to go back to our pension provider and ask for clarification that the lump sum received was not more than 25% of the crystallisation figure for this pension and then we were told by the senior manager overseeing our appeal that if that was the case, then the matter becomes academic and no tax will be owed by us on that lump sum. Under HMRC rules nobody can have a tax free lump sum of more than 25%, so we have been assured that this is the case.

I havent been on here for a while, good to see you are still on here. As I said, the Tax Manager at CRA was advised that i would post this on the forum and he did not say that it was not a good idea.
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit

Last edited by lins and Stef McLachlan; May 18th 2017 at 2:58 am. Reason: Typo
lins and Stef McLachlan is offline   Reply With Quote
Old May 18th 2017, 3:17 am   #8
Binned by Muderators
 
Joined: Jul 2007
Location: White Rock BC
Posts: 11,633
JonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Thanks for the reply. And good for you for arguing your case.

My interpretation of the law and the tax treaties is that the lump sum is taxable in Canada though I am far from saying that I know everything about everything.

There are some issues where the CRA adopt an administrative policy which is not in accordance with the wording of the Act. I wonder if this is one. I was hoping you could point me to an official interpretation or ruling on this because you have the inside track to make quite a few British Expats very happy indeed.
__________________
Any reference to tax above is for general interest only and is not intended as professional advice.
JonboyE is offline   Reply With Quote
Old May 18th 2017, 3:40 am   #9
Back in US & happy!
 
Joined: Nov 2011
Posts: 505
becks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond reputebecks_r has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

I went through this with accountants and financial advisors both in UK and USA. One of the problems with discussing pensions is the use of the words 'lump sum'. In UK we talk about taking a lump sum that is part of the overall pension pot, and right now the 25% lump sum (in UK terms) is tax free in UK. In USA lump sum is used to talk about taking the whole of the pension pot. If you took all the money out of your UK pension and brought it over to USA, it would be taxed here in USA. But part of the pension isn't a lump sum in USA, and the tax treaty means the 25% tax free won't be taxed in USA.

Somewhere I have a flowchart that I was sent that showed all this, but a quick search on my laptop hasn't found it. If I find it, I will attach it - if I can!
becks_r is offline   Reply With Quote
Old May 18th 2017, 3:56 am   #10
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

I will give my case worker a call tomorrow and see if they can clarify where the 25% thing originates. Having been in the Police Force and also going to court and dealing with legal jargon, it is subject to individual interpretation. If you put 10 people in a room with a piece of complex legislation, they will all read something different into it and that is a fact.

Legislation and laws are not written to be easily understood and in my view a lot of court time is taken up with different sides trying to put their own slant on things.

I had heard that US citizens dont have to pay tax on their lump sums so again it brought into question why, as part of the same legal system, part of the commonwealth, having the same Royal Family, thereby having much closer ties between UK and Canada, that Uk immigrants appeared to suffer a different set of rules.

All this was stacking up in favour of being a wrong decision to tax Tax Free Lump sums. It could be just a simple language misinterpretation....we all know that Canadian English and British English are different and I am sure everyone coming here has had an "oops" moment recounting stories from Uk, which have meant something totally different to the Canadian Audience.

To lighten the mood......my "oops" moment was when I was recounting being "knocked up by a Policeman in the middle of the night because my car lights were left on". Of course that was just getting a knock on the door.....but my audience was aghast that I had been made PREGNANT and was openly discussing the matter with them. I still laugh about that discussion to this day and so do my Canadian friends.
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit

Last edited by lins and Stef McLachlan; May 18th 2017 at 3:58 am. Reason: Typo
lins and Stef McLachlan is offline   Reply With Quote
Old May 18th 2017, 7:46 am   #11
BE Forum Addict
 
Hurlabrick's Avatar
 
Joined: Apr 2013
Location: Ottawa
Posts: 1,252
Hurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond reputeHurlabrick has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Very, very interesting and good for you sticking to your guns!


I meekly made the assumption that if I transferred my UK Personal Pension to Canada, then I could kiss goodbye to any 25% PCLS, which is why I have already rolled my UK PP over in to a UK Income Drawdown, specifically to release my PCLS before we move to Canada.
__________________
Spousal sponsorship: Recd CPC 23/6/2016, AOR 12/7/2016, SA 23/8/2016, LVO, DM 21/12/2016, CoPR 24/12/2016, Flagpole 11/04/2017, PR Card 01/07/2017, Landed 10/11/2017 Ottawa
Spousal sponsorship FAQ / Wiki
Spousal Sponsorship via London spreadsheet
Hurlabrick is offline   Reply With Quote
Old May 18th 2017, 11:08 am   #12
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Thats good for you. That wouldnt have worked for us as we were already in Canada by the time my husbands pension paid out.
Have a great day
Stef
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit
lins and Stef McLachlan is offline   Reply With Quote
Old May 18th 2017, 11:48 am   #13
Hamster Killer
Premium Member
 
BristolUK's Avatar
 
Joined: Jan 2008
Location: Moncton, NB, CANADA
Posts: 21,944
BristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond reputeBristolUK has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

Quote:
Originally Posted by lins and Stef McLachlan View Post

To lighten the mood......my "oops" moment was when I was recounting being "knocked up by a Policeman in the middle of the night because my car lights were left on". Of course that was just getting a knock on the door.....but my audience was aghast that I had been made PREGNANT...
I confess I was initially wondering what piece of the legal system made that an appropriate action.
BristolUK is offline   Reply With Quote
Old May 19th 2017, 4:33 am   #14
Binned by Muderators
 
Joined: Jul 2007
Location: White Rock BC
Posts: 11,633
JonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

I will be interested to know if the CRA official has cited paragraph 56(1)(a)(i)(C.1) of the Income Tax Act.
__________________
Any reference to tax above is for general interest only and is not intended as professional advice.
JonboyE is offline   Reply With Quote
Old May 19th 2017, 6:12 am   #15
BE Forum Addict
 
Joined: Feb 2005
Posts: 1,501
lins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond reputelins and Stef McLachlan has a reputation beyond repute
Default Re: READ ME. PENSION RULES UK to Canada

I will let you know as soon as I can get to soeak to him. I left a message yesterday but he didnt come back to me. I had a look at this and it does not specify the magic 25% but could be a likely candidate.
Stef
__________________
Landed 24th August 2010. Been a real bumpy ride. Decent jobs hard to find skills NOT recognised here. Bankrupt Feb 2014 to Nov 2014.
2017 not where we want to be workwise or financially, but feeling a bit brighter about the future. UK now in a mess re Brexit
lins and Stef McLachlan is offline   Reply With Quote
Reply

Go Back   British Expats / Living & Moving Abroad / Canada


Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off



All times are GMT. The time now is 1:49 pm.


We are a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon.com and affiliated sites.
Powered by vBulletin: ©2000 - 2018, Jelsoft Enterprises Ltd.
© 1999-2010 BritishExpats.com