GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
Oct 14th 2009, 4:23 pm
#61
Joined: Sep 2008
Posts: 12,830
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
Land - 1 Jan 2010 when the exchange rate is say; $1.60
Left behind UK assests, house(rented out) & savings valued at £350K or $560K on the date of landing.
1 Jan 2011 exchange rate say,$2.00, UK house sold & savings transferred to Canada and now worth $700k (assuming no other capital growth)
Capital gain due to improvement in exchange rate = $160K (CGT payable on 50%) therefore tax to pay in Canada would be $20.3k
Left behind UK assests, house(rented out) & savings valued at £350K or $560K on the date of landing.
1 Jan 2011 exchange rate say,$2.00, UK house sold & savings transferred to Canada and now worth $700k (assuming no other capital growth)
Capital gain due to improvement in exchange rate = $160K (CGT payable on 50%) therefore tax to pay in Canada would be $20.3k
Oct 14th 2009, 4:28 pm
#62
Joined: Aug 2005
Posts: 14,227
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I sincerely hope youre correct. Our problem is it looks as if our visas will be issued before the end of this year so we potentially face "landing" at a time with very low rates. From previous contributors to this thread I understand that a low rate creates the potential for a significant Canadian CGT charge if the rate improves. Below is a little scenario which is my understanding of how CGT would apply to an improvement in rates between "landing" and bringing over the bulk of your assets, it would be great to hear comments on this from any of you tax experts out there.
Scenario,
Land - 1 Jan 2010 when the exchange rate is say; $1.60
Left behind UK assests, house(rented out) & savings valued at £350K or $560K on the date of landing.
1 Jan 2011 exchange rate say,$2.00, UK house sold & savings transferred to Canada and now worth $700k (assuming no other capital growth)
Capital gain due to improvement in exchange rate = $160K (CGT payable on 50%) therefore tax to pay in Canada would be $20.3k
Scenario,
Land - 1 Jan 2010 when the exchange rate is say; $1.60
Left behind UK assests, house(rented out) & savings valued at £350K or $560K on the date of landing.
1 Jan 2011 exchange rate say,$2.00, UK house sold & savings transferred to Canada and now worth $700k (assuming no other capital growth)
Capital gain due to improvement in exchange rate = $160K (CGT payable on 50%) therefore tax to pay in Canada would be $20.3k
I'm not saying it does work that way, but if it doesn't then I could buy a load of GBP now, wait (maybe quite a while
) for it to go to 2.00 and then buy the CAD back tax free!
Oct 14th 2009, 4:32 pm
#63
Joined: Sep 2008
Posts: 12,830
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
That's currency trading and it ain't tax free! On the up side, if you lose money CRA will allow you to deduct your losses.
Oct 14th 2009, 4:51 pm
#64
Joined: Aug 2005
Posts: 14,227
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
*Assume it's an investment and I'm not doing it to make a living.
Oct 14th 2009, 5:06 pm
#65
Joined: Sep 2008
Posts: 12,830
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
Not sure why you don't think it makes sense. You buy anything as an investment, regardless of whether you do it for a living or not, you pay tax in an increase in value, savings, GIC, property, share or currency. When you became a tax resident is irrelevant, unless you bought the asset prior to becoming one, then the deemed disposition rules apply.
Oct 14th 2009, 5:19 pm
#66
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Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
There are other factors than speculation. Canada is an oil exporting country so as the price of oil rises again there is a greater demand for Canadian dollars. Therefore the currency strengthens.
Oct 14th 2009, 5:26 pm
#67
Joined: Aug 2005
Posts: 14,227
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
Not sure why you don't think it makes sense. You buy anything as an investment, regardless of whether you do it for a living or not, you pay tax in an increase in value, savings, GIC, property, share or currency. When you became a tax resident is irrelevant, unless you bought the asset prior to becoming one, then the deemed disposition rules apply.
Oct 14th 2009, 6:19 pm
#68
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Location: Calgary
Posts: 3,340
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
There is a comparison to be made with the UK possibly. I don't know how strong the pound was when north sea oil was booming but I would expect it artificially strengthened the pound and contributed to the decline of manufacturing/industry at that time. The same could well happen in Canada.
Canada hasn't done any "quantitative easing" yet has it (?) which would be another factor strengthening the CAN$.
It's pretty clear the government in the UK is content to let the pound fall in an attempt to help an export led recovery.
Oct 14th 2009, 6:22 pm
#69
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Joined: May 2009
Location: Wolfville, NS
Posts: 144
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
It is important we point out some key economic facts- because there has been some slightly misleading information posted in this thread and talk of the Canadian economy doing well and being ahead of the UK is frankly ludicrous.
1/ Canada has a national debt at 64% of it's GDP versus the UK which is 57%.
2/ I know it may be measured differently and I don't have the figure to hand but unemployment is still higher in Canada.
3/ The central interest rate in Canada is 0.25% versus 0.5% in the UK.
The bottomline for me is there is no other factor than speculative currency trading that explains the current rate of exchange between the pound and the canadian dollar. Therefore I re-iterate that the bottom is just around the corner.
1/ Canada has a national debt at 64% of it's GDP versus the UK which is 57%.
2/ I know it may be measured differently and I don't have the figure to hand but unemployment is still higher in Canada.
3/ The central interest rate in Canada is 0.25% versus 0.5% in the UK.
The bottomline for me is there is no other factor than speculative currency trading that explains the current rate of exchange between the pound and the canadian dollar. Therefore I re-iterate that the bottom is just around the corner.
One can also debate about what is included in the 64% and 57%. Provincial debt? Unfunded pension liabilities? PFI?
Small difference in unemployment and central bank rates? In the current, very unstable economic environment who cares? I'm pretty sure Canada has always had a higher unemployment rate than the UK by some measures.
Of course speculation plays a role FX. And speculation is normally rooted in some reality.
Oct 14th 2009, 6:29 pm
#70
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Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I agree the oil price is a factor together with all the other primary resources that Canada is able to extract and export. However, the downside of the high CAN$ is that export of manufactured goods becomes more difficult.
There is a comparison to be made with the UK possibly. I don't know how strong the pound was when north sea oil was booming but I would expect it artificially strengthened the pound and contributed to the decline of manufacturing/industry at that time. The same could well happen in Canada.
Canada hasn't done any "quantitative easing" yet has it (?) which would be another factor strengthening the CAN$.
It's pretty clear the government in the UK is content to let the pound fall in an attempt to help an export led recovery.
There is a comparison to be made with the UK possibly. I don't know how strong the pound was when north sea oil was booming but I would expect it artificially strengthened the pound and contributed to the decline of manufacturing/industry at that time. The same could well happen in Canada.
Canada hasn't done any "quantitative easing" yet has it (?) which would be another factor strengthening the CAN$.
It's pretty clear the government in the UK is content to let the pound fall in an attempt to help an export led recovery.
There has not been the same kind of quantitative easing in Canada that there has been in the UK and the US. However, the government is planning on a deficit up to $50bn this year so this is putting some more money into the economy. In the meantime there is not much more the government can do except wait for the US economy start to recover.
Oct 14th 2009, 6:30 pm
#71
Joined: Aug 2005
Posts: 14,227
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I agree. GBP has fallen against everything lately, and while this general weakness may stop it doesn't necessarily mean that GBP/CAD will go higher if demand for CAD continues to rise.
Oct 14th 2009, 6:32 pm
#72
Joined: Aug 2005
Posts: 14,227
Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I agree that the strength of the CAD is a serious problem for Canadian manufacturers. I also think the Bank of Canada would dearly love to let the dollar fall, but with a base rate of 0.5% there is not a lot more they can do.
There has not been the same kind of quantitative easing in Canada that there has been in the UK and the US. However, the government is planning on a deficit up to $50bn this year so this is putting some more money into the economy. In the meantime there is not much more the government can do except wait for the US economy start to recover.
There has not been the same kind of quantitative easing in Canada that there has been in the UK and the US. However, the government is planning on a deficit up to $50bn this year so this is putting some more money into the economy. In the meantime there is not much more the government can do except wait for the US economy start to recover.
Oct 14th 2009, 6:37 pm
#73
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Location: White Rock BC
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Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I noticed that a few banks have started to increase there 5+ year fixed rates recently. That certainly signals that the money markets expect rates to increase over the medium-term. I think we had both worked out that this was bound to happen.
Oct 14th 2009, 10:52 pm
#74
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Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
Oct 14th 2009, 11:13 pm
#75
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Re: GB Pound Vs CAD Dollar - HOW LOW CAN IT GO?
I too would be interested to hear more about this - we landed around a year and a half ago, with exchange about $2.10, and we need to move some of our English cash over now; it won't wait. How do we claim this as a loss????
Thanks so much!
Thanks so much!