lins and Stef McLachlan

I am not on here to get into a war of words with anyone. It is on the North American Continent not Europe, was my point, nothing more.

Fortunately for us we have pensions which are not just State pensions, so we do get cost of living raises.

So lets just agree to not try to take things so literally, and leave it at that. Courts and Government are there in order to set legislation and right any wrongs.

dave2003

The reason I maintained my RRIF & TFSA in Canada, after I settled in England are several:

I left England when I was a schoolboy, and like so many present day prospective immigrants to Canada, I was full of doubt about whether I could adapt to life in a new country-so I kept my financial options open by maintaining my RRIF & TFSA in case I decided to return to Canada.

The reason I thought, initially, to keep my RRIF & TFSA, and cash out after my relocation to England was that I thought I may need more cash to buy a home in England. As it turns out, I had enough unencumbered cash to buy a modest apartment without resorting to cash from my RRIF. I had thought that the 25% Canadian withholding tax was a price worth paying for home ownership here. That thought process was part of a long train of enquiry about the consequences of ditching my Canadian registered assets, the outcome of which was a decision to keep them in Canada.

Much of the information I garnered came from this Brit Expats website, and particularly the experiences of its contributors in a similar situation.

To my understanding, RRIFs/RRSPs & TFSAs are not recognized by HMRC as they are in Canada for taxation purposes, and so yes, any income or gains made by cashing out an RRIF / TFSA in Canada would be taxed, if any, according to Canada's rules. However, cashing them out after leaving Canada could have dire consequences, including taxation of capital gains and dividends. I am not a tax expert, but others, such as Jonboy, have given good reference about the rules in Canada and the UK. Everyone contemplating a move in either direction should check carefully the tax consequences.

My investments in registered and unregistered accounts over the years were made according to a simple axiom, only invest in what you know about, in my case Canada and the U.S. So here, in the UK, I have invested in an ISA, buying into internationally known ETFs and stocks that have performed as well as those in my Canadian assets.

As for taxation in the UK, I find that I pay about the same percentage wise as I did in Canada.

If I may comment about the original theme of this discussion, lump sums payments made from a pension plan in one country, and its taxation in another, one has to look at the social policies underlying tax advantaged pension plans. The intention is to encourage people to provide, as much as possible, for their future needs, thus reducing reliance on state provision. Policy makers intend, I think, that any benefit arising from tax advantaged pension plans should ultimately accrue to the benefit of the economy of the country in which the advantage was offered, and this is not easily transferred to or another country.

jandro

Thanks. If you withdraw the RRSP while resident in Canada and pay the 25% withdrawal tax you shouldn't be subject to any taxes on capital gains or income by HMRC when you transfer the funds to the UK. You just don't get any tax relief from the HMRC. That's how I read it.

dgagitw

That seems to apply that not only would you pay the Canadian 25% withholding, you'd also get hit for any capital gains outside your UK allowance. Am I reading this correctly?!

scilly

I wasn't intending a "war of words"

I just did not understand your reference to us all being in North America.

Sorry if I offended you by asking for clarification of something that was rather carelessly stated (says the editor in me!)!

lins and Stef McLachlan

I now have an answer
Quote:
A review of the facts and documents submitted indicates that regarding the lump sum pension amount.....the letter you submitted from The British Transport Police dated 11th May, 2017 indicates that 25% of the total crystallisation amount can be taken as a tax free lump sum. Sub claus 56 (1) (a) (i) (C.1) of the Income Tax Act indicates that any foreign pension amount that would not be subject to income tax in the country of origin will not be subject to income tax in Canada.

I do still have a fight on my hands with regards to CRAs understanding of how it is all worked out. They are saying that based on their calculations we had more than 25% which categorically is NOT ALLOWED under HMRC rules and despite two letters clarifying this to them ( the pension provider BTP....not HMRC) , they are in a bit of a blind spot in as much as they are trying to take the figures, multiply them by the exchange rate used from goodness knows what date and then come up with horrendous CDN $ figures. For one thing the lump sum is only subject to the exchange rate on the exact day you receive it, unlike the monthly pension and there should be no need whatsoever for any exchange calculations to be done with regards to the lump sum.....it is irrelevant.

We have now called HMRC in the UK and their Technical Dept will look into this and come up with a letter which should tell them the same as the other two letters.....AGAIN......really, what are they trying to prove. I do know one thing for sure, if they allow this to go to Tax Court, then they will be made to look extremely dense.

So I am getting cross about this now. Once I have the indication of which way we are going with this, I will let everyone know. The Act is quite clear......watch this space
Stef

becks_r

This is exactly what I got told in by my US accountant - if the pension amount isn't subject to tax in UK, then it isn't subject to tax in USA. I also didn't transfer all the 25% over to me in US, I have left some in my UK bank account, so hopefully won't get into a row about the exchange rate

scrubbedexpat134

Lins and Stef. Thanks for the clarification, I share your frustration but CRA will fight this to the bitter end as it could have huge ramifications on Past, Present and Future claims. Just hope everything works for you, I will be in the same boat soon.

scrubbedexpat134

Just as a foot note to this, and correct me if I am wrong but I think that under the pension changes from a few years ago you can take any % of your pension pot as a lump sum but only 25% is tax free the rest is taxable.

becks_r

I think you are right, but I was told that taking more than 25% does have huge tax implications. So I was advised to take 25% tax free out and put the rest into one flexible drawdown pension, still in UK.

Hurlabrick

Yes you are right. That is called an UFPLS (Uncrystallised Funds Pension Lump Sum). So yes, 25% is tax free and the remainder is taxed at your marginal rate for that year (so if the 75% is say £100k, it will be treated as though that were gross salary in addition to any other salary etc. for that tax year).

For anything other than small sums, it is often smarter (tax wise) to take the 25% tax free lump sum and put the balance e into a flexible drawdown, then take withdrawals from that as you please over several tax years (of course any withdrawal from an IDD is also treated like gross salary for that tax year, but you may be able to manage it so you don't go into higher rate tax in any one year etc.).

scrubbedexpat134

Here's an interesting site
https://taxinterpretations.com/tax-t...act/section-56

lins and Stef McLachlan

We were not given the option of taking any more than 25%
Stef

scrubbedexpat134

This may help.
https://www.moneyadviceservice.org.u...on-pot-as-cash

becks_r

I think it depends on the type of pension you have, and who with! I had multiple pensions and I could have taken 100% of the money out of a couple of them, but others wouldn't allow that. I phoned each provider and the majority of them were extremely inflexible as soon as I said I lived abroad. Even the ones with a flexible drawdown schemes of their own wouldn't let me move my pension with them into their other scheme, even if I had wanted to. And 1 of them wouldn't even let me get the 25% tax free if I had left the pension with them.

So, although the rules from the UK government allow for 25% tax free from 55 years old, and allow you to move the pension money to something other than an annuity, each scheme has it's own rules which may not allow you to do what the government say you can! But luckily, I could transfer all the pensions into a flexible drawdown scheme with another provider and then get the 25% at that point.