dgagitw

Prompted by another thread on what happens when you spend GBP from an account...

I'm about to inherit - probate is underway - a small fairly low value property in the UK. My first thought was to sell it as it's not somewhere I would ever want to visit particularly but it turns out there's an old couple living there who've been renting it for quite a while and I'd rather they got the chance to live our their years without having to move if they can (it's rented on an AST so I can ask them move out if I want to). Setting up a new tenancy, getting an agent to handle stuff and so on is all pretty straightforward so I don't have any insurmountable concerns about the practicalities but starting to think about the tax implications is worrying me. At least in principle, to be sure of not breaching the $200 annual FX gains exemption, it looks like I'd have to track every single payment in and out of my UK bank account and do a load of fiddly calculations. What's more, I'd have to keep track of all of that back to when I moved here in 2010 to calculate things exactly.

I can't believe that most, if any, people do this when handling overseas property. What's the score?

For those not familiar with ACB, here's a link:

https://www.adjustedcostbase.ca/blog...capital-gains/

Snowy560

We rented out our UK house for nearly 3 years before we sold it. We reported the income on a HMRC self assessment return. We also reported the income to the CRA on our yearly tax returns and were taxed accordingly. That was it.

dgagitw

Did you include capital gains due to fluctuations in the exchange rate as part of that income? E.g. if you spent, say 2k GBP, on repairs that would be a deemed disposition and could very easily push you over the $200 annual exemption for FX gains if you’d built up the GBP balance when the exchange rate was lower than when you spent the money. Or did you just ignore all of that and hope that the CRA wouldn’t ask or notice?

Snowy560

[QUOTE=dgagitw;12442639]Did you include capital gains due to fluctuations in the exchange rate as part of that income? E.g. if you spent, say 2k GBP, on repairs that would be a deemed disposition and could very easily push you over the $200 annual exemption for FX gains if you’d built up the GBP balance when the exchange rate was lower than when you spent the money. Or did you just ignore all of that and hope that the CRA wouldn’t ask or notice?[/QUOTE]



I did not "ignore all of that and hope the CRA wouldn't ask or notice". I really don't like the inference you are making.
I didn't even look into what you are referring to and I suspect most people don't.

I simply filed my taxes via an (Canadian) accountant who did the calculations. I was not trying to hide anything. I suggest you see an accountant and do the same.

As an aside, I get paid some money in GBP for contract work I do. Again I report this to the accountant who does the calculation and reports it to the CRA. When we sold our house, the same thing happened (and we paid the CGT that was calculated to be due).

Any income and any assets that I have in GBP is all reported to the CRA each and every year, including the currency.

dgagitw

[QUOTE=Snowy560;12442649] Ok, so head in the sand then. I’ve talked to an accountant already and got a blank look on the FX capital gains question which leads me to believe that your statement that most people either don’t know about this or do and ignore it is probably correct.

Snowy560

Well the CRA (and Canadian accountants) obviously don't know how to deal with tax returns either, because all my income and assets is always reported in the applicable currency.

dgagitw

Canadian tax returns are in CAD only - you have to do all the translations yourself (or using tax filing software) - so I’m not sure what that’s supposed to mean.

Almost Canadian

Where do you get such nonsense from? I noticed you did the same in another thread.

I get a pension paid in sterling which is deposited to my UK account. I declare this income to CRA using the exchange rate on the day I receive my pension to convert it to Canadian dollars, and pay tax to CRA based upon that.

I use my UK credit card to make purchases in the UK and then transfer any funds from my UK account to pay the UK credit card. As I have already paid the tax on these funds the fluctuation between the value of those funds in CDN is irrelevant and the items are purchase in sterling.

If your argument is correct, and, let's say, a Canadian chooses to use his/her Canadian dollars to purchase something in the US, s/he would have to calculate the difference between the value in US dollars at the time they "earned" the funds, and the time that they used the funds and, any difference, would result in a capital loss or gain. Which, of course, is nonsense.

I accept that, if any funds were exchanged between currencies, then an argument could be made that there is a capital loss or gain but, if no exchange is made, there is no such gain or loss. If you have any authority upon which you intend to rely to support your position, please provide it for us.

Snowy560

I have watched the accountant do it. She notes the currency and the exchange rate she uses.

I do similar to AC on UK income and settling my UK CC bill.

BristolUK

I've been doing foreign income on my tax returns using CRA approved tax software - on line versions - since 2007 and you input the currency in which the income is paid and the exchange rate.

They know it fluctuates so they suggest you use the average rate for the year quoted on Bank of Canada's website.

Snowy560

Yes that's what the Accountant does.

dgagitw

The gain or loss arises when you spend the money (a deemed disposition). If it just sits in your account doing nothing then there’s no problem (other than that each receipt makes it more painful to calculate the adjusted cost base of course).

Links supporting this:

https://www.theglobeandmail.com/glob...ticle28440263/

http://www.advisor.ca/tax/tax-news/h...l-gains-228863

https://www.adjustedcostbase.ca/blog...-transactions/

https://www.canada.ca/en/revenue-age...ns-losses.html

Jonnyboy (probably not quite the correct username) posted some more CRA links with details a while back too.

dgagitw

If you receive, say, 1000 GBP when the exchange rate is 1.5 to the dollar then spend that 1000 when the exchange rate has changed to 2 to the dollar, the CRA considers that to be a capital gain of 500 CAD which you must report on your tax return as such. That’s the simple case, consider what it’s like when you receive monthly rent payments over a number of years and make regular payments yourself for maintenance, insurance etc.

dgagitw

I've got to say, this is one of the most unfriendly forums I've frequented.

dgagitw

Link to a thread on the subject of capital gains when spending foreign currency:

http://britishexpats.com/forum/canada-56/capital-gains-foreign-currency-718432/#post9387875