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

Re: British Forces Pension
 

Report the pension as income, get a certificate of tax paid (or other proof of tax paid), claim the tax paid as a foreign tax credit. You only end up paying what you would have paid on the income in Canada, at least that's what I do.

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.

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.

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.

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

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.

Re: British Forces Pension
 

OK. I'm talking about employment income, not pension.

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.

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.

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?

Re: British Forces Pension
 

You can have your pension payed into a Canadian account, but as I understand it, XP use a currency trader who charges for each months transaction. I prefer to save it over a few months in my UK account and transfer it in bulk.