Freelancer payment from UK client
 

Hi

I think I've read something about this here before, so apologies if this has been covered already. I moved to Canada a couple of months ago and am a freelancer. I've been doing some work for a UK client, who normally pays me directly into my UK bank account. However, I vaguely remember reading something about this having tax implications - you have to pay tax on any difference in the exchange rate from the day you're paid until the day you do the tax return (or something?!).

For tax purposes, would it be simpler if they pay me by cheque and I deposit that directly into my Canadian bank account? My concerns are that the cheque will take forever to clear and that the bank here is likely to charge me to deposit a Sterling cheque.

Any suggestions?

I also wondered whether I need to officially register as self employed.

Thanks very much.

Re: Freelancer payment from UK client
 

For tax purposes in Canada you convert the £ you receive into Canadaian dollars on the day you receive it. If you have several receipts throughout the year you can choose to use the annual average rate for the year published by the Bank of Canada.

You can let the £ accumulate in the UK and convert them later, then, if the amount of $ you recieve is more than $200 different to the amount you declared as income then the difference that is more than $200 is a capital gain or loss. Half is taxable.

It is marginally simpler but keeping a note of the amounts and exchange rates in a spreadsheet is not that difficult and certainly cheaper.



If you self-enployed income will be more than $30,000 a year you must register for GST/HST. If not, then just put the self-employed income on your tax return.

Re: Freelancer payment from UK client
 

I'm in the same situation as you, Susieh. Will be interested to hear what you decide to do, as I haven't figured it out yet. I will be freelancing from January, though. What I've done already is opened an account with Scotiabank as they don't charge for ATM withdrawals from Barclays accounts. So I plan to withdraw money from the ATM and pay it right into my Scotiabank account. Not sure if this is the right way to go about this, though.

Re: Freelancer payment from UK client
 

If you are drawing on a GBP account from an ATM in Canada, that has to be one of the worst FX rates you will get. Write a cheque on your UK account and deposit it into you CDN account, large amounts use an FX broker.

Re: Freelancer payment from UK client
 

Write yourself a cheque on you UK account and deposit that into your CDN account. There can be a hold on funds, but the rate is better than cash. If you have a larger amount use an FX broker, you'll get a few pips better than the banks. For small amounts (under $5k) it won't make much difference.

Re: Freelancer payment from UK client
 

JonboyE - Thanks for all the help. I'm not going to earn over $30K, as I only freelance part-time, so I won't need to register for HST. I'll just stick with being paid into my UK account and keep a spreadsheet of the exchange rates as you suggested.

foreigngirl - good luck with the freelancing! Hope you're enjoying Canadian life so far.

Aviator - thanks for the cheque tip. That's really useful to know. Will have to dust off my UK cheque book!

Re: Freelancer payment from UK client
 

Hello,
I've decided to revive this thread as I have another question. I'm currently filling out my P85 form.
Not sure how to answer question 19: 'Will you get any income from the UK after you have left?
I'll be paid into my UK bank account, so do I answer 'yes'? However, I'll be a freelancer in the Canada and will be paying my taxes there, so should I answer 'no'?

Thank you.

Re: Freelancer payment from UK client
 

You will be getting income from the UK by the sounds of it, so why would you answer 'no' ?

Re: Freelancer payment from UK client
 

Won't I have to pay tax on it then?

Re: Freelancer payment from UK client
 

At some point. As a contractor you can be paid gross in the UK and report income in Canada and pay tax here. You may need to advise HRMC you are doing this. If the UK business does withhold tax, you pay any difference to CRA after showing foreign tax paid. Having the income deposited into a UK account may not help with HRMC, you will also have to track the FX as fluctuations are also reportable, although small amounts might not make a ton of difference.

Re: Freelancer payment from UK client
 

I've assumed that as I am based in Canada and offer my services from Canada, the fact that one of my clients is in the UK is really not very relevant: it's not as if I'm in the employ of a UK company! So I said "no" on the P85, and plan just to pay Canadian tax on my consultancy/royalty income...