Souvy

I don't think they do.

Zoe Bell

wonder what the situation would be if I owed them 69 cents?

smivers

I think I read somewhere that $20 either way is the cut off.

JonboyE

$2.

Zoe Bell

Well I can confirm that the CRA have decided not to mail out my refund and have applied an " adjustment " instead !

Steve_

I still can't understand why you're using a trust, from your description a UK corporation is paying dividends which go into a trust and then your income comes from that, which means the UK corporation is paying corporation tax it doesn't have to. If you invoiced them directly, that would be a deductible cost to them, so presumably they could then pay you more.

Normally how I see working overseas for a company phrased is, (a) be self-employed and invoice them (for one-offs); (b) start your own company and that invoices them and pays you (for slightly more than one) or (c) the overseas company starts up a payroll in your country or a branch in your country with a payroll and pays you directly (for bigger operations). Trusts are a way of doing it but you are the first person I've ever encountered who has done it that way.

Anyway all I've got to say is the CRA closed down efile because of that Heartbleed bug, so filing on paper wins again...

Souvy

Maybe I have not been explaining things very well. My work income and my trust income are two different things. I work for a UK company and get paid gross. All the taxes and other deductions are paid in Canada (quarterly installments). The trust is something over which I have no control.

Many years ago, my late uncle set up a house-building business in the south of England. It still exists. He got rich and was told by his accountants to get rid of some of his money. He did that by setting up a trust, which holds about 75% of the shares in the company. The trust income comes from share dividends paid out by the company and which are then shared-out among the trust beneficiaries. There are 20 such beneficiaries. Actually there are rather more; death and inheritance have diluted many of the 5% stakes and I'm one of the few full 5% stakeholders left.

When the annual payments are made, some tax has already been deducted in the UK. I declare the gross amount and claim the tax paid (foreign tax credit).

The trust itself has no value. I have no capital and no control. The only time I will is when the trust is wound up (it has 30 years left to run) or the company is sold (I'd then be due 5% of 75% of the proceeds).

Whether or not I'm still around in 30 years is open to debate. My share would go to my natural son (I don't think the rules allow my stepson to inherit part of it).

Steve_

Presumably before the capital gains holdover tax for family business was introduced. I don't know how much that company is worth now but it may make more sense not to use the trust now, I think the limit is £10 million before a trust would make sense.

But anyway I was just procrastinating, it's just taken me nearly two days to work out the figure on box 132 of my return... Not too impressed with tax software but I think stock trading software is something I need to look into.

DougC

Ok, I'm a newbie here & currently wading through my second Canadian Tax Return. I've have some questions about the dreaded T1135 which I'd be very grateful if someone (JonboyE?) could answer.

- I have a rental property in the UK which generates income
- I bought it before I came to Canada
- I became Resident for tax purposes in Canada in 2012 so as per CRA rules, I did not submit a T1135 last year (first year in country)

My questions are to do with Section 5, concerning real property outside Canada:

1. The box which asks for the max cost amount during the year - what value goes here? I've read that it should be the Fair Market Value of the property when I arrived in Canada (ie. 2012) but it specifically asks for max cost amount during the year (ie. 2013). Very contradictory!

2. Cost amount at year end box - this could show a vastly different figure depending on which property value I use in the previous box, largely due to the difference in excahnge rates from 2012 to end of 2013. Is this then viewed as a Capital Gain by CRA?

3. Based on questions 2 above, is it worth recording a relatively high value for the first time in the max cost box so I'm not setting myself up for a big Capital Gains Tax bill if I sell the house in future?

Thanks in advance - there's some great advice posted on this forum!!

DougC

Steve_

Cost amount means that, how much did it cost you, so that could be the same figure as for last year. The cost amount could go up, say you add something onto the property.

I complained to the CRA about this form and a "senior agent" in Ottawa told me they have had loads of complaints, which is why for 2013 only they have a "provisional" way of completing it, basically you stuff everything under section 6 of the form.

One thing she told me which hadn't occurred to me was that not only are things like RRSPs, TFSAs and RESPs exempt because they're essentially held in trust, but also they've had a big problem with people who've got IRAs in the US because a regular IRA and 401(k) is exempt from reporting on this form because of the pension provisions of Article 18 of the tax treaty, but many other things that Americans consider tax shelters are not tax shelters in Canada and have to be reported on T1135 (e.g. coverdell accounts and 529s). This bit of info in turn has caused a bit of a panic as some Americans living here have suddenly realized they should have been paying tax on certain investments in Canada.

Well thought out this. Kudos.

DougC

Thanks for your reply Steve.... but to be honest, I'm now even more confused: when you say its cost amount is "how much it cost you", do you mean its value when I bought it? Or when I landed in Canada & became resident for tax purposes? Or the max value during the tax year (as the T1135 asks for)? It's really not clear.

Also, can anyone provide answers to my other two questions regarding how all this might affect a capital gain in the future?

With just over a week to go until filing date, I'd really appreciate some solid answers.

Thanks in advance, DougC

Steve_

How much it cost you. How much did you pay for it. If you made improvements or repairs for example, that increases the amount it cost during the year.

IIRC, the UK-Canada tax treaty doesn't reset the cost base, so as far as capital gains go on real property, the CGT is from the date you acquired it, not the date you moved.

Although there is an exemption in both Canadian and UK law for your principal residence, not sure how that works if you move from one to the other. Ask the CRA.

DougC

Thanks again for your reply Steve. However, I did a bit more digging & I think you might be wrong.....this is what I found on the CRA website at:

http://www.cra-arc.gc.ca/tx/nnrsdnts...35_fq-eng.html

In their FAQs, here's the relevant one:

31. What is the reporting requirement for new immigrants? How is the cost amount determined for property that was owned at the time of immigration to Canada?

An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada. For a new resident, the cost amount of foreign property is its fair market value at the time he or she first became resident in Canada. Use this fair market value in determining the new resident’s Form T1135 filing requirement in future years.

So, using representative figures how about this for a scenario:

- I bought my house in the UK in 2007 for an equivalent of $500,000 (using the actual cost of the house & the GBP:CAD exchange rate at that time)

- I moved to Canada in 2011 & at that time, the fair market value of the house was $300,000 due to a fall in UK house prices & the poor exchange rate at the time. This is the figure I'm supposed to report on my T1135.

- In 2014, the house is now worth $400,000 due to a slight rise in UK house prices but more because of the better echange rate.

If decide to sell the house now, I will incur a $100,000 loss (difference between 2007 purchase price & 2014 value) but in the eyes of the CRA, I will show a $100,000 capital gain (difference between 2011 value when I moved to Canada & its current value) on which I will be taxed.

In summary, even though I would actually lose a ton of money, it would look like I had made a gain & then to add insult to injury, CRA would tax me on this!!! How on earth is this possible?

DougC

Twitcher1958

Doug - A further question on your supposed scenario - what evidence do you have that the fair market value of your UK house was $300k in 2011? I have asked this question elsewhere but I don't know what the CRA will need and accept as proof.

DougC

Me neither. I can only guess that if they really started looking, they could use online searches for how much neighbouring properties sold for around the same time.

Maybe I'm being paranoid now but I want to get this right from the start so I don't have a huge headache further down the line.....