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First Time Tax Return with UK income

First Time Tax Return with UK income

Old Apr 22nd 2010, 4:21 pm
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Question First Time Tax Return with UK income

Just about to do my first tax return and have a query about my UK income. My husband and I moved to Barrie, ON on 27 Oct 2009 and I kept my UK job (working from home) and am paid weekly to our UK bank account. I was able to sort out my tax code back in the UK so that I no longer pay tax over there (tax code NT).

I am having trouble trying to work out whether I can claim for work related expenses as I had to set up a home office out of my own pocket and purchased things like a printer, monitor, stationery, desk etc. Also, can I claim anything towards our rent, electricity etc as I work from home?

Also, am I able to claim anything back for our 3 months medical cover when we arrived (until OHIP kicked in)?

Finally, my husband received one final payment from his UK employer after our arrival date, which was for outstanding holiday pay up until 5 Nov 09. Does he need to report this? He had no further income after that so we are trying to work out whether he needs to do a tax return. 50% of the medical cover we purchased was for him and we're unsure whether he should also claim that back in this return or wait till next year.

Thanks in advance,
Angela
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Old Apr 22nd 2010, 5:25 pm
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Default Re: First Time Tax Return with UK income

Originally Posted by spencerbear
JI am having trouble trying to work out whether I can claim for work related expenses as I had to set up a home office out of my own pocket and purchased things like a printer, monitor, stationery, desk etc. Also, can I claim anything towards our rent, electricity etc as I work from home?
Yes. What you can claim depends on whether or not you are an employee or self-employed. The amount an employee can claim is limited to a proportionate share of rent, electricity, heating and maintenance. You can claim stationary but an employee cannot claim the printer, monitor, desk etc. You also must get your employer to certify on T2200 that you are required to incur these expenses as condition of your contract of employment.

As a self-employed person you can claim a share of other household costs including mortgage interest, property tax and insurance. You can also claim capital cost allowances on furniture and equipment.


Also, am I able to claim anything back for our 3 months medical cover when we arrived (until OHIP kicked in)?
Possibly. This is considered a medical expense so you can claim a tax credit on the amount that exceeds 3% of your net income.

Finally, my husband received one final payment from his UK employer after our arrival date, which was for outstanding holiday pay up until 5 Nov 09. Does he need to report this?
Yes, technically. Under Canadian tax law employment income is considered as earned on the day you are paid.

He had no further income after that so we are trying to work out whether he needs to do a tax return. 50% of the medical cover we purchased was for him and we're unsure whether he should also claim that back in this return or wait till next year.
With no further income it is unlikely that he will owe any tax. For all practical purposes he should file a tax return, even if he doesn't need to by law.

You can report total medical expenses on either of your returns. The credit is non-refundable so there is no point in reporting it on the return of someone who doesn't owe tax.
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Old Apr 22nd 2010, 5:58 pm
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Default Re: First Time Tax Return with UK income

Thanks for your quick reply.

I'm uncertain whether the CRA will see me as an employee or self employed for tax purposes. I have worked for the UK company for 7 years and have a existing (original) contract of employment but obviously it doesn't state that my workplace is from home (in Canada) or that I have to cover my own work expenses. Not sure how to proceed with this so I think I'll have to give them a ring to clarify my employment status.

I'll get back to you once I know more. Thanks again.
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Old Apr 22nd 2010, 6:43 pm
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Default Re: First Time Tax Return with UK income

I just spoke to CRA and thought I'd post their response in case if helps anyone else.

The first agent told me it sounded as if I would be classed as Self Employed as I am not reimbursed for work related expenses. He transferred me to a second agent for clarification who basically said that if I am on the payroll, I am classed as an employee (makes sense and is what I expected). I asked him about claiming for these non-reimbursed work expenses such as desk, printer etc and he told me I can claim anything work related and need to report them on form T777. I also need to get my employer to fill in the T2200 and send both off with my tax return.

I do wonder though that if I rang again I might be told something different .
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Old Apr 22nd 2010, 6:53 pm
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Default Re: First Time Tax Return with UK income

Originally Posted by spencerbear
I just spoke to CRA and thought I'd post their response in case if helps anyone else.

The first agent told me it sounded as if I would be classed as Self Employed as I am not reimbursed for work related expenses. He transferred me to a second agent for clarification who basically said that if I am on the payroll, I am classed as an employee (makes sense and is what I expected). I asked him about claiming for these non-reimbursed work expenses such as desk, printer etc and he told me I can claim anything work related and need to report them on form T777. I also need to get my employer to fill in the T2200 and send both off with my tax return.

I do wonder though that if I rang again I might be told something different .
Probably.

In your situation I would be tempted to file as a self-employed person. Is what you do something that could be done for Canadian clients? If so, try and pick up some bits of work from other clients, or at least get some quotes or proposals out there.
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Old Apr 22nd 2010, 7:00 pm
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Default Re: First Time Tax Return with UK income

Originally Posted by spencerbear
I asked him about claiming for these non-reimbursed work expenses such as desk, printer etc and he told me I can claim anything work related ...
http://www.cra-arc.gc.ca/E/pub/tp/it...it352r2-e.html

Especially paragraph 10 (d).
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Old Apr 22nd 2010, 7:13 pm
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Default Re: First Time Tax Return with UK income

Its confusing when their agents give contradictory answers i.e. claiming certain expenses.

I think you're right that I should go down the self-employment route as although I'm paid through payroll, so are other contractors and technically the work that I do, I could do for Canadian clients. To file as self employed, am I right in thinking that I just put my UK income in the self employment income section on the form? I'm going to have a read through their self employment booklet now and see what other forms I might have to fill in.
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Old Apr 22nd 2010, 7:17 pm
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Default Re: First Time Tax Return with UK income

Originally Posted by spencerbear
Its confusing when their agents give contradictory answers i.e. claiming certain expenses.

I think you're right that I should go down the self-employment route as although I'm paid through payroll, so are other contractors and technically the work that I do, I could do for Canadian clients. To file as self employed, am I right in thinking that I just put my UK income in the self employment income section on the form? I'm going to have a read through their self employment booklet now and see what other forms I might have to fill in.
Yes, you need to complete a T2125 form and send this in with your tax return.
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Old Apr 22nd 2010, 7:38 pm
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Default Re: First Time Tax Return with UK income

Ok, here's a possible spanner in the works.

I've just read their document RC4110 (Employee or Self Employed) and for 90% of their criteria, I'd be classed as self employed, especially as I can work for anyone else, but because I get paid holidays from my UK employer, I'm classed an an employee. Do you know anywhere that I could phone to get a definitive answer on it? The guide also mentions that employers are supposed to deduct CPP and EI but how can a UK employer contribute to that? Its all very confusing .
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Old Apr 22nd 2010, 7:53 pm
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Default Re: First Time Tax Return with UK income

Originally Posted by spencerbear
Ok, here's a possible spanner in the works.

I've just read their document RC4110 (Employee or Self Employed) and for 90% of their criteria, I'd be classed as self employed, especially as I can work for anyone else, but because I get paid holidays from my UK employer, I'm classed an an employee. Do you know anywhere that I could phone to get a definitive answer on it? The guide also mentions that employers are supposed to deduct CPP and EI but how can a UK employer contribute to that? Its all very confusing .
No. There is no definitive answer. Each case is decided on the relevant facts. If 90% of the facts indicate that you are self-employed and 10% that you are an employee then you are self-employed.

If you file as self-employed and the CRA subsequently determine that you are an employee what is the worst that can happen? They deny you the expenses that you would not have claimed in any case as an employee and charge you a bit of interest.
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