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Canada TAX - UK Child Support

Canada TAX - UK Child Support

Old Mar 2nd 2013, 9:49 pm
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Default Canada TAX - UK Child Support

I am filing my Canadian Tax return. I have dependant children to whom I pay support in the UK.

I am struggling to work out if these payments are deductible. According to the Canada Revenue Agency I do not need to file any court order with them for child support payments, as my order is only for child support:
http://www.cra-arc.gc.ca/tx/ndvdls/t...strng-eng.html

According to Canada revenue Agency you can deduct payments made to a non-resident (I think!!!)


However I believe, from what I am reading, that this is subject to the tax treaty rules. Reading the treaty it seems that tax should be payable by the recipient of the monies in the UK (Article 17, section 5):
http://www.fin.gc.ca/treaties-conventions/uk_-eng.asp

I am confused. Is there anyone out there who knows if Child support payments from Canada to children in the UK are deductible on my Canadian return please?

Thank you in advance for any help.
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Old Mar 3rd 2013, 3:47 pm
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Default Re: Canada TAX - UK Child Support

In Canada child support is not a deductible expense for tax purposes. Spousal support is deductible if there is a written agreement, or court order, in place that requires the payments to be made.

If spousal support payments are deductible to the payer, they are taxable to the receiver. The tax treaty is saying that if the receiver is tax-resident in the UK then only the UK can tax the support income.
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Old Mar 3rd 2013, 5:24 pm
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Default Re: Canada TAX - UK Child Support

Originally Posted by JonboyE View Post
In Canada child support is not a deductible expense for tax purposes. Spousal support is deductible if there is a written agreement, or court order, in place that requires the payments to be made.

If spousal support payments are deductible to the payer, they are taxable to the receiver. The tax treaty is saying that if the receiver is tax-resident in the UK then only the UK can tax the support income.
Thank you JonboyE. That is pretty much what I thought. Absolutely support payments within Canada are not deductible.

However the Canada Revenue Agency has this article:
http://www.cra-arc.gc.ca/tx/ndvdls/t...ymnts-eng.html

Here they simply refer to 'Support Payments'. When you follow the link to understand what a support payment is:


They include payments to children. So if I read this as it is, support payments can be deductible, and according to thier definition of a support payment, it can include a payment to a child?
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Old Mar 3rd 2013, 10:31 pm
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Default Re: Canada TAX - UK Child Support

Originally Posted by keith904 View Post
Thank you JonboyE. That is pretty much what I thought. Absolutely support payments within Canada are not deductible.

However the Canada Revenue Agency has this article:
http://www.cra-arc.gc.ca/tx/ndvdls/t...ymnts-eng.html

Here they simply refer to 'Support Payments'. When you follow the link to understand what a support payment is:


They include payments to children. So if I read this as it is, support payments can be deductible, and according to thier definition of a support payment, it can include a payment to a child?
You read this bit?

Tax rules for court orders or written agreements made after April 1997

Generally, child support payments made under a court order or written agreement made after April 1997 (or before May 1997 if any other situations mentioned above apply) are not deductible by the payer and do not have to be included in income by the recipient. Spousal support payments continue to be deductible to the payer and must be included in the recipient’s income. The following explanations provide more information about these rules.
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Old Mar 4th 2013, 12:02 am
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Default Re: Canada TAX - UK Child Support

Originally Posted by keith904 View Post
Thank you JonboyE. That is pretty much what I thought. Absolutely support payments within Canada are not deductible.

However the Canada Revenue Agency has this article:
http://www.cra-arc.gc.ca/tx/ndvdls/t...ymnts-eng.html

Here they simply refer to 'Support Payments'. When you follow the link to understand what a support payment is:


They include payments to children. So if I read this as it is, support payments can be deductible, and according to thier definition of a support payment, it can include a payment to a child?
That is certainly what it seems to say. I can't see anything in the ITA to support this interpretation, but so what. The same wording is included in the curret version of P102.

Last edited by JonboyE; Mar 4th 2013 at 12:04 am.
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Old Mar 5th 2013, 7:11 pm
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Default Re: Canada TAX - UK Child Support

So I guess my question would be, to whom do I need to talk to get a definitive answer? Or is it the case that I need to file the return and see if they reject it?
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Old Mar 5th 2013, 7:31 pm
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Default Re: Canada TAX - UK Child Support

Originally Posted by keith904 View Post
So I guess my question would be, to whom do I need to talk to get a definitive answer? Or is it the case that I need to file the return and see if they reject it?
Send in a copy of the writtten agreement along with form T1158 http://www.cra-arc.gc.ca/E/pbg/tf/t1158/t1158-11e.pdf. Include a note to say the recipient(s) are non-residents.

For 2012 it is certainly an option to claim the full amount and wait until they question it. I would be tempted to keep some money aside until they have finished their review.
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Old Mar 5th 2013, 11:26 pm
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Default Re: Canada TAX - UK Child Support

That is good advice, thank you. How do I know when/if they carry out a review? Apologies for this, seemingly, ignorant question...but always good to understand the process.
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