Gwenoop14

Hi, Noob here, recommenced Canadian tax residency last year after many years in the UK.

My question is probably a silly one, but I'm confused on when I need to report a capital gain relating to the GBP funds I still have in my UK current account. I know I need to report a CG when I transfer funds from my UK to my Canadian bank, and that this is based on the value of the funds when I acquired them (i.e. deemed disposition and re-acquisition on the date I recommenced Canadian tax residency using the bank of canada exchange rate on that date) compared to the CAD value when I transferred them (using the BoC rate on the transfer date). All correct so far?

But what if the funds never leave the UK before I spend them in the UK? E.g. I go on vacation to the UK and withdraw GBP1000 from my UK bank, spending it on hotels, car rental, etc. Are there capital gains implications here??

thanks.

dgagitw

Yes, it’s a deemed disposition and produces a gain or a loss depending on the change in FX rate relative to the adjusted cost base. If you’ve spent just a few quid you’re probably safe as there’s an annual $200 exemption. If you’ve spent enough to go over that you need to do some fairly hideous calcs to see what you owe or, alternatively, take the lowest rate there’s been since you arrived and calculate all spend as a gain against that. You’ll pay more tax that way than you need to but save yourself a load of calculating pain.

dbd33

I think it'd be a rare taxpayer who would report funds withdrawn and spent on consumables. If you bought objects and brought them back to Canada it might be another matter.

rawsalad

Very rare. I lived in UK for many years with a Canadian bank account and never told anyone.

Also didn't bother informing on the gains in my RRSP.

Perhaps I'm wrong but what HRMC don't know won't hurt them.

plasticcanuck

The CRA will recover the tax on your RRSP appreciation when you begin to withdraw the funds. There is no requirement to report the gains annually.

dbd33

All the more reason not to donate any of it to HRMC.

Former Lancastrian

I see the potential here for another episode to be added to the Netflix series Dirty Money

dgagitw

Probably true but be aware that the CRA and HMRC do share data so it’s not impossible you’ll get some difficult questions at some point. My take is that they’d be unlikely to come after you for this specifically - assuming it’s not really large sums of cash you’re spending - but that it’s the sort of thing that could cause you an immense amount of grief if you got audited.

dbd33

Theoretically, I suppose. I've been audited in Canada and nothing was asked about foreign bank accounts but then I'm not a Russian banker and I'm not named in any leak of offshore legal papers. Perhaps the OP is an African and a former head of state and does have cause to be concerned.

dgagitw

That was before the common reporting standard came along I assume? What triggered the audit?

Former Lancastrian

Either someone at CRA doing their job and became interested or suspicious of the return in front of them or computer says AUDIT.
There is also a possibility that the auditor knows dbd33 and is still pissed about the 5 bucks he still owes or that he has a profile on BE and asked a question and dbd33 gave one of his usual helpful replies and also might have had help with the backing of Novocastrian who is also known for being very friendly and helpful to other BE posters.

Aviator

Most audits are random, usually industry specific. Some triggered by a report on the rat line, other where the filers return does not meet the industry model for that occupation.

dbd33

A former associate was busted for a tax fraud, audits rippled out. I paid tax and penalties on an explainable deposit to a personal account. Years later I remember that I had hired a car for my visiting parents and they'd given me cash to pay for it. So, I understand how little things can become complicated. I'd still take cash from a UK account, if I had one, for beer on holiday and not report a potential capital gain on the money.