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Army pension
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 !!! :confused: 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 |
Re: Army pension
Originally Posted by debbieeasby
(Post 6551418)
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 !!! :confused: 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 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.:unsure: Winston |
Re: Army pension
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 |
Re: Army pension
Originally Posted by debbieeasby
(Post 6551418)
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 !!! :confused: 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 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 |
Re: Army pension
Originally Posted by Ad 12345
(Post 6936040)
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.
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. |
Re: Army pension
Originally Posted by Ad 12345
(Post 6936040)
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 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 |
Re: Army pension
Originally Posted by JonboyE
(Post 6936170)
2. Where under any provision of this Convention any person is relieved from tax in a Contracting State on certain income
|
Re: Army pension
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 |
Re: Army pension
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 |
Re: Army pension
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:thumbdown: |
Re: Army pension
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! |
Re: Army pension
Originally Posted by dinger24
(Post 6936445)
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! 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...:blink: |
Re: Army pension
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 |
Re: Army pension
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? |
Re: Army pension
Originally Posted by bielbs
(Post 6936955)
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? |
Re: Army pension
2204 Walkley Road
Ottawa ON K1A 1A8 Canada is the address of the Canada Revenue Agency International Tax Services Office. International tax is VERY complex. Even many practicing accountants don't really understand all the implications unless they specialize in this area. A lot of CRA auditors will not understand it and you will be very lucky to find a tax return preparation service who does. To avoid any doubt I would recommend getting an advance ruling from the CRA at the office listed above. And, don't rely on the word of someone on the 'phone. Get it in writing. |
Re: Army pension
Originally Posted by Ad 12345
(Post 6936887)
... 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. |
Re: Army pension
Originally Posted by JonboyE
(Post 6937165)
2204 Walkley Road
Ottawa ON K1A 1A8 Canada is the address of the Canada Revenue Agency International Tax Services Office. International tax is VERY complex. Even many practicing accountants don't really understand all the implications unless they specialize in this area. A lot of CRA auditors will not understand it and you will be very lucky to find a tax return preparation service who does. To avoid any doubt I would recommend getting an advance ruling from the CRA at the office listed above. And, don't rely on the word of someone on the 'phone. Get it in writing. I think the point I am making has been lost. There are many of you out there who do not need this debate but clear guidance as you are trying to plan your move to Canada. I guess if you are debating multi million off shore accounts in the Cayman Islands there is more grey than black and white, but the issue of a lump sum is not exactly the mystic many people are making it to be. More black and white than shades of grey and we in DPM prefer it to be like this. I do sincerely recommend you seek advice from an expert and not armchair accountants. You could end up making some poor decisions on poor int. I do however agree with one point that has been made. Any agreement you make, get it in writing. I believe mine is in the post today. |
Re: Army pension
I retired from the police and we also receieve a tax free lump sum in the UK and I got caught by this as we had already landed.
Its quite simple once you become a permament resident and can be shown to have some permanance in Canada ie: bought property; spouse living in Canada you become a liable for Canadian Taxes and the Canadians treat your lump sum as income. There are only two ways to avoid tax. 1. Make sure the lump sum is in your UK bank account before you land in Canada; you can then transfer it over to Canada with no tax imlications. 2. The other option is if you are already in Canada; you can declare it and pay loads of tax or you can invest the lump sum into a Canadian RRSP without any tax implications until you start taking the money out. I had to invest my lump sum. Hope this helps Rob. |
Re: Army pension
Originally Posted by TruckersWife
(Post 6936320)
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 However, have a look at this from the CRA's Interpretation Bulletin 397R: Service Pensions from Other Countries 12. Pursuant to paragraph 81(1)(e), a pension payment received from a foreign country on account of disability or death arising out of war service is not required to be included in income provided the foreign country grants substantially similar relief for the year to persons receiving payments referred to in 10 above and subject to the comments in 13 below. 13. Paragraph 81(1)(e) only applies in respect of pension payments made by countries that were allies of His Majesty at the time of the war service referred to in 12 above. The countries which so qualify are as follows: World War I ... Commonwealth Countries... World War II ...Commonwealth Countries Section 81(1) says: War pensions (e) a pension payment received on account of disability or death arising out of a war from a country that was an ally of Canada at the time of the war, if that country grants substantially similar relief for the year to a person receiving a pension referred to in paragraph 81(1)(d); To be honest, this is not an area of tax I know much about, but I'm learning since I joined BE! It is clear this exemption only applies to pensions as a result of disabilities received in conflict. I would be interested to know if it would apply to soldiers disabled in a) Afghanistan (where Canada is fighting and thus an ally of the UK) or b) Iraq (where they are not). If you get any more information I would appreciate it if you can share it with us. |
Re: Army pension
Originally Posted by Almost Canadian
(Post 6936395)
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:thumbdown: I'm not convinced that applies to all the posters on this thread. |
Re: Army pension
Originally Posted by Robbie500
(Post 6937578)
I retired from the police and we also receieve a tax free lump sum in the UK and I got caught by this as we had already landed.
Its quite simple once you become a permament resident and can be shown to have some permanance in Canada ie: bought property; spouse living in Canada you become a liable for Canadian Taxes and the Canadians treat your lump sum as income. There are only two ways to avoid tax. 1. Make sure the lump sum is in your UK bank account before you land in Canada; you can then transfer it over to Canada with no tax imlications. 2. The other option is if you are already in Canada; you can declare it and pay loads of tax or you can invest the lump sum into a Canadian RRSP without any tax implications until you start taking the money out. I had to invest my lump sum. Hope this helps Rob. For me it will be on a small amount of about £2300 (i.e. 06 to 09) but if I had served longer past 2006 it will obviously be bigger. If I had transfered to AFPS05 (hopefully not many did) my 2nd tax free payment would have been around £28000. This will also affect those 12yrs+ on a preserved pension when you recieve your 2nd lump sum....my OH is one of them so we'll get caught twice...:( I wait to be corrected if i'm wrong please. |
Re: Army pension
most interesting thread thanks all
I have yet to be able to find what the tax free allowances are in canada and have spent an age on the canadian equivalant of the inland revenue site??? I dont pay much tax on my army pension and if the uk tax free allowance of £6015 or thereabouts is more generaous than any canadian tax free allowance does this mean I will have to pay the difference? eg if the canadian allowance was say only $5000 if indeed they have a tax free allowance???? |
Re: Army pension
Chumley,
The tax free allowances will vary from province to province. I have added a link for a Canadian tax calculator for you below. This includes all the allowances for each province. Hope this will help with the amount the dreaded tax man will sting you for. http://www.ey.com/GLOBAL/content.nsf...8_Personal_Tax Rob |
Re: Army pension
Originally Posted by JonboyE
(Post 6937762)
Pension payments awarded under the Pension Act are for service in Canadian (or Newfoundland) forces.
However, have a look at this from the CRA's Interpretation Bulletin 397R: Service Pensions from Other Countries 12. Pursuant to paragraph 81(1)(e), a pension payment received from a foreign country on account of disability or death arising out of war service is not required to be included in income provided the foreign country grants substantially similar relief for the year to persons receiving payments referred to in 10 above and subject to the comments in 13 below. 13. Paragraph 81(1)(e) only applies in respect of pension payments made by countries that were allies of His Majesty at the time of the war service referred to in 12 above. The countries which so qualify are as follows: World War I ... Commonwealth Countries... World War II ...Commonwealth Countries Section 81(1) says: War pensions (e) a pension payment received on account of disability or death arising out of a war from a country that was an ally of Canada at the time of the war, if that country grants substantially similar relief for the year to a person receiving a pension referred to in paragraph 81(1)(d); To be honest, this is not an area of tax I know much about, but I'm learning since I joined BE! It is clear this exemption only applies to pensions as a result of disabilities received in conflict. I would be interested to know if it would apply to soldiers disabled in a) Afghanistan (where Canada is fighting and thus an ally of the UK) or b) Iraq (where they are not). If you get any more information I would appreciate it if you can share it with us. The UK Forces' discription of a war pension and the CRA's may be very different. As I said, I have already tried this and failed:thumbdown: |
Re: Army pension
many thanks for the link rob much appreciated
|
Re: Army pension
Originally Posted by JonboyE
(Post 6937762)
Pension payments awarded under the Pension Act are for service in Canadian (or Newfoundland) forces.
However, have a look at this from the CRA's Interpretation Bulletin 397R: Service Pensions from Other Countries 12. Pursuant to paragraph 81(1)(e), a pension payment received from a foreign country on account of disability or death arising out of war service is not required to be included in income provided the foreign country grants substantially similar relief for the year to persons receiving payments referred to in 10 above and subject to the comments in 13 below. 13. Paragraph 81(1)(e) only applies in respect of pension payments made by countries that were allies of His Majesty at the time of the war service referred to in 12 above. The countries which so qualify are as follows: World War I ... Commonwealth Countries... World War II ...Commonwealth Countries Section 81(1) says: War pensions (e) a pension payment received on account of disability or death arising out of a war from a country that was an ally of Canada at the time of the war, if that country grants substantially similar relief for the year to a person receiving a pension referred to in paragraph 81(1)(d); To be honest, this is not an area of tax I know much about, but I'm learning since I joined BE! It is clear this exemption only applies to pensions as a result of disabilities received in conflict. I would be interested to know if it would apply to soldiers disabled in a) Afghanistan (where Canada is fighting and thus an ally of the UK) or b) Iraq (where they are not). If you get any more information I would appreciate it if you can share it with us. |
Re: Army pension
Originally Posted by ijjtaft
(Post 6941479)
I just had a medical to see what percentage of war pension I would recieve, as my Husband and I are already living in Newfoundland on a work permit. The UK Veterans agency got the Canadian Veterans agency to carry out the medical. I was told by the doctor performing my medical that if we applied for citizenship and got it then the Canadians would take over payments give me the same help with drugs as the UK and in most cases the pension increases. Apparently the UK and Canadian Government have an arrangement in place...Just thought I'd add this incase it helps anybody.
My pension increases each year too |
Re: Army pension
Originally Posted by Almost Canadian
(Post 6942945)
My pension increases each year too
|
Re: Army pension
Originally Posted by Souvenir
(Post 6942964)
Just out of interest, do UK soldiers get lump-sum payouts if they are invalided out?
http://www.mod.uk/NR/rdonlyres/37968...0/7AFPS_05.pdf The above is to do with the new AFPS05 which will pay you a tax free lump sum depending on the Level (tier) of severity. For the old farts like me on AFPS75 it it's Non-Attributable Invaliding you will get an immediate pension & tax free lump sum @ 3x the yearly pension which depends on time served. Attributable Invaliding you could recieve a tax free lump sum and tax free pension but to cut a long story short these will be in result of investigation and assessments of % disability by the Veterans Agency. All pensions are index linked |
Re: Army pension
Originally Posted by DAVIE_MAC
(Post 6943113)
Yes.
http://www.mod.uk/NR/rdonlyres/37968...0/7AFPS_05.pdf The above is to do with the new AFPS05 which will pay you a tax free lump sum depending on the Level (tier) of severity. For the old farts like me on AFPS75 it it's Non-Attributable Invaliding you will get an immediate pension & tax free lump sum @ 3x the yearly pension which depends on time served. Attributable Invaliding you could recieve a tax free lump sum and tax free pension but to cut a long story short these will be in result of investigation and assessments of % disability by the Veterans Agency. All pensions are index linked |
Re: Army pension
Thankyou for all the help, I'm going to contact the Canadian tax office direct and the Canadian Veterens agency and see what they say as well.
I'll let you know if I get anything back |
Re: Army pension
Originally Posted by Souvenir
(Post 6942964)
Just out of interest, do UK soldiers get lump-sum payouts if they are invalided out?
|
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