British Forces Pension
#1
Forum Regular
Thread Starter
Joined: May 2007
Location: Toronto, Ontario
Posts: 239
British Forces Pension
We are filing taxes for the first time this year. Could anyone let me know what the procedure is to add the British Forces Pension to the income earned:
We understand that we have to pay tax on it but is there anyway we claim the tax back from the UK Govt. Any help would be grateful.
Cheers
We understand that we have to pay tax on it but is there anyway we claim the tax back from the UK Govt. Any help would be grateful.
Cheers
#2
Joined: Sep 2008
Posts: 12,830
Re: British Forces Pension
We are filing taxes for the first time this year. Could anyone let me know what the procedure is to add the British Forces Pension to the income earned:
We understand that we have to pay tax on it but is there anyway we claim the tax back from the UK Govt. Any help would be grateful.
Cheers
We understand that we have to pay tax on it but is there anyway we claim the tax back from the UK Govt. Any help would be grateful.
Cheers
#3
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,678
Re: British Forces Pension
Convert the gross £ received at 1.58607 (for 2011) and report it on line 115 of your tax return. You will need to complete form T2209 (federal) and T2036 (provincial) to claim a credit for the UK tax withheld. As Aviator says above you will need to keep evidence of the UK tax withheld as this is a favorite area for the CRA to review.
#4
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Thread Starter
Joined: May 2007
Location: Toronto, Ontario
Posts: 239
Re: British Forces Pension
So it is as easy as that? When do we put the details forward to the UK tax department for their payment back? Cheers again great info much appreciated.
#5
Slob
Joined: Sep 2009
Location: Ottineau
Posts: 6,342
Re: British Forces Pension
Convert the gross £ received at 1.58607 (for 2011) and report it on line 115 of your tax return. You will need to complete form T2209 (federal) and T2036 (provincial) to claim a credit for the UK tax withheld. As Aviator says above you will need to keep evidence of the UK tax withheld as this is a favorite area for the CRA to review.
You are bang-on about the foreign tax credit. I've been done twice on that one. It's a red-flag but easily sorted if you've got the appropriate documentation.
#6
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Joined: Jul 2007
Location: White Rock BC
Posts: 11,678
Re: British Forces Pension
Are you sure about using one rate for the whole year? My accountant asked me to break down the income and exchange rate on a monthly basis. It's new, apparently.
You are bang-on about the foreign tax credit. I've been done twice on that one. It's a red-flag but easily sorted if you've got the appropriate documentation.
You are bang-on about the foreign tax credit. I've been done twice on that one. It's a red-flag but easily sorted if you've got the appropriate documentation.
Line 115 - Pensions from a foreign country
If you received a pension from another country, you have to report the total amount on your return in Canadian dollars. Use the Bank of Canada exchange rate that was in effect on the day you received the pension. If you received the pension at different times during the year, use the average annual exchange rate. The average monthly rate as well as the daily rate are available by visiting the Bank of Canada Web site.
http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
#7
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Joined: Jul 2007
Location: White Rock BC
Posts: 11,678
Re: British Forces Pension
If you are going to apply for a refund from HMRC you should not claim a foreign tax credit. That would be double dipping. The CRA don't like it. When you apply to HMRC for a refund of UK tax withheld you will need the CRA to certify that you are tax-resident in Canada. This is one thing they will check.
#8
Slob
Joined: Sep 2009
Location: Ottineau
Posts: 6,342
Re: British Forces Pension
This is from the CRA website (my bolding);
Line 115 - Pensions from a foreign country
If you received a pension from another country, you have to report the total amount on your return in Canadian dollars. Use the Bank of Canada exchange rate that was in effect on the day you received the pension. If you received the pension at different times during the year, use the average annual exchange rate. The average monthly rate as well as the daily rate are available by visiting the Bank of Canada Web site.
http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
Line 115 - Pensions from a foreign country
If you received a pension from another country, you have to report the total amount on your return in Canadian dollars. Use the Bank of Canada exchange rate that was in effect on the day you received the pension. If you received the pension at different times during the year, use the average annual exchange rate. The average monthly rate as well as the daily rate are available by visiting the Bank of Canada Web site.
http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
In past years it was sufficient for me to tell my accountant the total amount that had hit my Canadian bank account during the year. It seems to have changed this year. He needed to declare what the individual monthly income was and what the prevailing exchange rate was. That wasn't hard because I keep a spreadsheet for all that stuff.
#9
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Joined: Jul 2007
Location: White Rock BC
Posts: 11,678
Re: British Forces Pension
From IT270:
16. For the purpose of claiming a foreign tax credit, an amount in respect of income taxes which is payable to a foreign government in a foreign currency should be converted to Canadian dollars at the rate at which the income itself (other than capital gains) was converted. For business income, this could be done monthly, quarterly, semi-annually or annually, using the average rate for the period, depending on the taxpayer's normal method of reporting income. For investment income which was subject only to a tax similar to that imposed by Part XIII of the Act, the conversion rate should be the rate applicable on the date of receipt of the income, although use of the average rate for the month or the mid-month rate would usually be acceptable. For other types of income, such as salaries and wages, the average rate for the months in which they are earned is the most appropriate rate. For capital gains, the rate should approximate the rate applicable at the time the gain was realized.
Your accountant is correct, though this document is dated 2004. If you immediately convert your earnings into CAD the actual amount you receive would also be acceptable IMO.
16. For the purpose of claiming a foreign tax credit, an amount in respect of income taxes which is payable to a foreign government in a foreign currency should be converted to Canadian dollars at the rate at which the income itself (other than capital gains) was converted. For business income, this could be done monthly, quarterly, semi-annually or annually, using the average rate for the period, depending on the taxpayer's normal method of reporting income. For investment income which was subject only to a tax similar to that imposed by Part XIII of the Act, the conversion rate should be the rate applicable on the date of receipt of the income, although use of the average rate for the month or the mid-month rate would usually be acceptable. For other types of income, such as salaries and wages, the average rate for the months in which they are earned is the most appropriate rate. For capital gains, the rate should approximate the rate applicable at the time the gain was realized.
Your accountant is correct, though this document is dated 2004. If you immediately convert your earnings into CAD the actual amount you receive would also be acceptable IMO.
Last edited by JonboyE; Apr 24th 2012 at 9:01 pm.
#10
Banned
Joined: Jan 2012
Posts: 744
Re: British Forces Pension
I thought that if you are now an overseas resident, you could inform the pensions office and they will then pay it to you gross and in Can$. It is then just income received and will then be subject to canadian tax only. Simplifying matters...unless there is a reason to continue receiving it Uk? Is it tax efficient? Or just convenient for commitments at home in UK?
#11
Re: British Forces Pension
I thought that if you are now an overseas resident, you could inform the pensions office and they will then pay it to you gross and in Can$. It is then just income received and will then be subject to canadian tax only. Simplifying matters...unless there is a reason to continue receiving it Uk? Is it tax efficient? Or just convenient for commitments at home in UK?