debbieeasby

Morning,

Just a quick question does anyone have an army pension that they have transfered over with them??

My hubby s army pension is tax free in the UK would this be the case in Canada?? Or is it better to leave it in a uk accound and maybe transfer it a few times a year?? So many questions ... Please can anyone tell me do things get easier !!!

Only joking we knew it wasnt going to be easy, JUst wish England was more like it ... Anyhow have decided to put house on the market asap and just rent IF it sells that way we are ready .

Thanks
Debbie

Winston Green

You hubby has a strange army pension if it is tax free! His gratuity may have been tax free but not his pension. The Gratuity is only tax free if you are still in UK when it is paid.

It does not matter if you have it paid into a UK or Canadian bank you will still have to declare it on your Canadian tax return as overseas income.

If you hubby contacts Xaffinity he can have it paid tax free into a canadian bank for a small charge but will have to pay canadian tax on it. If he leaves it in the UK bank he will pay UK tax on it and then canadian tax on the difference between the UK rate and Canadian rate.

Sorry but there is no way round this without committing tax evasion.

Winston

debbieeasby

Hi Winston ,

Grahams pension is tax free due to war pension as he came out with an injury , which doesn t effect his daily work ect it ment all his pension became tax free . Happy (well sort of) to pay tax in Canada as its still a big amount every month just wondered best way to sort it .

Will certainly look at Xaffinity.

Thanks
Debbie

Ad 12345

Hi
This is a subject that causes considerable debate and vex. I know having spent many sleepless nights on the subject.

The rules are quite strict and clear. On the day you land, everything you earn from that day onwards is put on your T1 (Canadian Tax return, year 1 Jan - 31 Dec). This includes any UK based salary, rental income, gratuity, pension etc.

In order to prevent being double taxed, the UK Govt will either provide you a form and you stop paying taxes (normally best for pension payments and rental income) OR you can retrospectively claim back taxes paid. For example you move to Canada and land whilst your husband is on resettlement leave.

The greatest fear is the issue of the lump sum which the UK tax man agrees is tax free but every blog I have read states the Canadian Tax Man (CRA) will tax (in my case a bill of $63,000 was looming large!). I then worked out that the CRA is capped at only 10% interest and almost gave up until I found Article 27 Para 2 of the Convention Between the Government of Canada and the Government of the United Kingdom. In essence, if the UK tax man treats this money as tax free, so does the CRA.

I am currently on an HR Block tax course as part of my resettlement (learning Canadian tax) and checked my research with the International Department who agree my findings. You have to declare the income on the T1 and then deduct it.

The whole Canadian Tax thing isvery different to the UK but bottom line is once you land, the Tax Tag Team pass the batten to the CRA and your lump sum is safe.

Hope this helps.

Adrian

JonboyE

I have to say that I do not agree with your interpretation. The paragraph in full is

2. Where under any provision of this Convention any person is relieved from tax in a Contracting State on certain income and, under the law in force in the other Contracting State, that person is subject to tax in that other State in respect of that income by reference to the amount thereof which is remitted to or received in that other State, the relief from tax to be allowed under this Convention in the first-mentioned State shall apply only to the amounts so remitted or received.

The key words to me are subject to tax in that other State in respect of that income by reference to the amount thereof which is remitted to or received in that other State. The UK has a status of tax residency that does not exist in Canada, that of being resident but not domiciled in the UK. Someone who is resident but not domiciled in the UK only pays UK tax on amounts remitted or received in the UK (not their world-wide income as is the case for most tax residents).

A Canadian tax resident is taxed on their world-wide income, not on amounts remitted or received, so I don't see how this provision can apply. I'll be happy to be shown that I am wrong.

The 10% cap you mention is a reduced witholding tax. Most income earned in Canada by non-residents is subject to a 25% witholding tax by the CRA. The treaty limits the witholding tax to 10% if the beneficiary is a UK resident. Allthough it affects the share of the tax the CRA and HMRC take, it doesn't affect the overall amount of tax the beneficiary will have to pay.

DAVIE_MAC

Adrian,

This is invaluable info and advice as I have - Like Others - been working around dates to move after leaving the forces as I was told you must be in UK when your gratuity is paid to you if your paying Canadian Tax.

My plan was to go on Civvie work attachment to retrain then straight onto termination leave and be in Canada on the day I leave the forces, therefore as your entitled to work on your termination leave I could be working & earning in Canada while still serving then have a smooth transition from one job to another without a break in wages as you would do if you were being discharged in UK, but the gratuity issue put a stop to that.

From your advice then it looks as though I could go ahead and do this without any tax implications to my gratuity, is there a link to the document you mentioned to enable me to have read of this paragraph you mentioned.

Thanks for your help

Dave

JonboyE

I know it is bad form to quote your own posts but I thought this important. The tax free lump sum from a military pension is an element of UK tax law. It is not tax free as a result of any provision in the Convention, therefore I do not believe this paragraph applies.

TruckersWife

Ok, I have been searching for weeks on this very matter. I am in receipt of such a pension, being disabled out of the forces a number of years ago.

My veterens disability pension is assessed at 40% with mobility allowance included.

Now I appreciate the last two posters are tax experts, but can I draw your attention to the following quote and link and ask - pretty please - if you would look into it a little further for myself, the OP and anyone else in a similar situation

The corresponding award in Canada is http://www.vac-acc.gc.ca/clients/sub...ce=dispen#a03a

and the quote I refer to is
Pension payments awarded under the Pension Act are tax-free.

In the UK the award is given by the veterens agency and the award is tax free.

Thankyou in advance for any help either of you (or anyone else) can give, especially as for me this could mean the difference in moving out there or not with hubby

TruckersWife

Sorry it wont let me copy and paste, but page 59 says these allowances are tax exempt or thats my understanding (but I am no accountant) but there again this could be only before PR is granted??????????


http://books.google.co.uk/books?id=e...ax&output=html

Almost Canadian

I have PR and I too receive a tax free Army pension (in fact I receive two).

They are both taxed in Canada as part of my income. You will have to pay tax on it despite what anything you read online says

dinger24

I think that the main question being asked (well for me and a couple of others) is:
British Army pension has a tax free lump sum paid at the end of 22yrs. If this was paid in Canada would it be taxed by the CRA?
As for the monthly payments these would be taxed
Can anyone confirm this.
A simple Yes No answer will do if possible!

DAVIE_MAC

Also just to confuse matters even more.

The tax free lump sum is a "Resettlement Grant" and not part of the pension.

However

You are allowed to commute a portion of your pension to give you a bigger lump sum and a lower monthly pension then the pension uplift kicks in again at 55 years of age.

I think this is where things get really complicated, because even if you don't commute you will still be in reciept of a Tax Free Resettlement Grant which will not be tied to your pension...

Ad 12345

Clearly the lines are clearly divided here. I apologise if I come over as a tax expert - I am not. I just took the issue who has been doing this job for 20 years and asked them for advice which they kindly gave for free. You would normally pay.

First of all people are disappearing down rabbit holes over the split between the resettlement grant and the commuted pension. As the UK Tax people treat both as being tax free they are considered as one for the purposes of the question that is vexing people wanting to move to Canada and are not really interested in the theoretical debate.

I did not provide the quote from Article 27, you are all capable of finding it yourselves. However I am most confused by the conceptual debate created below about states of residence that do not exist. I do not believe that the tax man would create meaningless rules, but you make your own minds up.

What people, trying to plan their lives need, is fact and not debate. I suggest if you are planning to move to Canada and are worried about gratuity, commuted pension, that big lump sum of money from the Army after 16/22 years is that you get in touch with HR Block International Department on Walkley Road and ask the professionals. Good luck and safe move.

Adrian

bielbs

My husband also has this issue, we are moving to Canada in the summer of 09 and he was hoping to be working there (like Dave) on his annual leave / termination leave from the Army, but concerns arose about paying tax on the end of service lump sum, (every little helps!)

Adrian, good news from you, - do you have the full address / phone number for HR Block International Department, is it UK or Canada?

Ad 12345

Sorry, it's in Ottawa, Canada, my new home town!! Beats Fallingbostel anyday!