UKtoTO

Hi All,

I’ve been searching through different posts and the wikis and have found this site very helpful but I have a few questions which any input on would be great!

A bit of background info:

I moved to Toronto from the UK in October 2016 on a working holiday permit with my partner. We own a property (with a mortgage) back in the UK and we are renting it out to tenants via a letting agent, again as of October 2016. We have filled in our UK NRL1 forms. With regards to the 2016-17 UK tax year, we qualify for split year treatment, so we will be classed as UK residents from Apr 2016 – Oct 2016 and non-residents from Oct 2016 to Apr 2017.

So my questions are:

1. I know we need to declare our rental income on both UK and Canadian tax returns. Am I correct in thinking we can also claim our expenses (letting agent fees, maintenance costs, etc) on both returns, regardless of whether we paid them while still in the UK or in Canada?

2. With regards to double taxation on this income, I’ve found different opinions on which agency to claim relief with. One thing I’ve read is to claim a refund with HMRC via the 'UK/Canada SI 1980 Number 709 with Protocols' form (unfortunately I can't link to it). But I’ve also read to claim back relief credits via the CRA. Does anyone have any further information on this process?

3. Tying in with the above question, it is very likely that my total UK income will be near the UK personal allowance, meaning I may not be liable to pay any UK tax. If this is the case, does this cancel out the need to apply for double taxation relief? I assume that, if I end up paying zero UK tax, I cannot then claim any kind of double taxation relief on our property income with the CRA?

4. Lastly, for the UK tax return, do I have to declare my employment income earned in Canadian during my non-resident section of the split year. I know I will not be taxed on Canadian income during this time, as non-residents are taxed only on UK income, but I'm unsure if I need to include it at all on the tax return.

Thanks very much for any help.

Steve_

Did you file a P85? If not, you really need to do that first. That's basically the answer to #4.

As far as the property goes the tax return in the UK after October only relates to the property, so yes you can claim related expenses in both places.

You claim a foreign tax credit in Canada for the UK income tax on the rental income from October onwards on T2209 when you file your T1. You should already have done that on your 2016 return because you were resident in Canada from October 2016 onwards. Your T1 is pro-rated for that period, which is explained in T4055: https://www.canada.ca/content/dam/cr.../t4055-16e.pdf

If you're not paying any UK tax, obviously there's nothing to claim a credit against, effectively you end up paying the higher of the two rates.

UKtoTO

Hi Steve,

Thanks for your reply.

We did look into the P85 form, however the guidance notes on it say that it is not necessary if you have to complete a tax return. We will be completing the supplementary residence pages in the UK return which will provide the same information I believe.

Thanks for the info on the tax credit, I will look into that. You're correct about the timeframe, I forgot to say in my original post that we're overdue on submitting the Canadian return.

I figured that would be the case regarding a Canadian credit if we ended up having no UK tax due, thanks for confirming.