Originally Posted by feelbritish (Post 11195851)

It was suggested I post this here for input from any expats on the Canadian forum who have had this problem! Here is my original post:

Yesterday we were at our accountants office doing our annual business and personal tax and while chatting we mentioned we were thinking of returning to UK. As we have property there we have discovered that we have to pay Capital Gains Tax on the increase in the value.

As we left in 2002 and prices rose extremely high after that and have not really dropped much in our area we are going to be saddled with a large bill. We are extremely upset to say the least. This property is in UK, not Canada and we owned it before we emigrated and have been paying tax to Canada on the rental income every year since we have lived here.

How did other expats deal with this issue? We are looking at a large sum here and we are retiring so could not do with this curved ball

Originally Posted by bats (Post 11195877)

Don't sell it.

Originally Posted by Jingsamichty (Post 11196877)

Is the capital gain based on the figures reported in the T1135s?

Originally Posted by dgagitw (Post 11196900)

Given that the T1135 only used to ask for broad bands for valuations for overseas assets then I don't see that any calculation could be driven from them. The amounts should be roughly reconcilable though. E.g. declaring a 1000 gain when you've been claiming to have 1,000,000 in assets might set some alaram bells off.

Originally Posted by Jingsamichty (Post 11196877)

Is the capital gain based on the figures reported in the T1135s?

Originally Posted by Jingsamichty (Post 11196911)

So what is actual liability for CGT based on? What if you 'just leave' Canada, will they come chasing you for a valuation?

Originally Posted by Jingsamichty (Post 11196911)

So what is actual liability for CGT based on?

Originally Posted by JonboyE (Post 11196949)

It is based on the increase in value, in Canadian dollars, during the time you live in Canada.



The Canadian tax system is based on the assumption that everybody will diligently and honestly report their taxable income. There is a form (T1243) that you are supposed to complete to calculate gains and losses on emigration. They could cross reference this to T1135s you have filed.

The CRA have a special unit that tracks down undeclared foreign property of Canadian tax payers. They can search the UK Land Registry for example. However, their target is people who have c. $50 million in foreign assets. I have no idea how much effort they would put into tracking down people who failed to report more modest amounts.

I guess it is a bit like earning cash in hand and not reporting it. Some people do this and get away with it, others don't.

Originally Posted by JonboyE (Post 11196949)

It is based on the increase in value, in Canadian dollars, during the time you live in Canada.



The Canadian tax system is based on the assumption that everybody will diligently and honestly report their taxable income. There is a form (T1243) that you are supposed to complete to calculate gains and losses on emigration. They could cross reference this to T1135s you have filed.

The CRA have a special unit that tracks down undeclared foreign property of Canadian tax payers. They can search the UK Land Registry for example. However, their target is people who have c. $50 million in foreign assets. I have no idea how much effort they would put into tracking down people who failed to report more modest amounts.
I guess it is a bit like earning cash in hand and not reporting it. Some people do this and get away with it, others don't.

Originally Posted by rivingtonpike (Post 11195883)

isn't it the case that if you move back into the house for a period of time and it becomes your primary residence, there's n o CGT to pay?

Originally Posted by feelbritish (Post 11196997)

Thanks for making that so clear to us. We have decided not to take a chance, as we probably will not have the cash later, nor do we want it hanging over our heads.

Originally Posted by Jingsamichty (Post 11197088)

How do you intend to volunteer this information to the taxman?

Originally Posted by Jingsamichty (Post 11197093)

Can the valuation be self-declared?

Originally Posted by JonboyE (Post 11197112)

Yes. However, the CRA can ask for evidence. If you can't produce documentary evidence to support your valuation the CRA could substitute a higher one and then it will be up to you to prove their valuation is wrong rather than prove yours is right. An appraisal will protect you.

I deal with a lot more immigrants than emigrants but I have yet to see the CRA challenge a self-declared valuation. This is not to say that they never will, but I suspect if the value declared seems reasonable, and especially if it is accompanied by a large cheque, a return will be accepted as filed.

Originally Posted by Jingsamichty (Post 11197137)

I was thinking more about trying to submit a self-declaration accompanied by a rebate for a capital loss?

Originally Posted by Jingsamichty (Post 11197196)

Jon, what do you make of this? (values for illustrative purposes only)

2007 - became tax resident in Canada. UK property worth GBP300,000. At 2007 exchange rate (2.20) this is worth $660,000.

2014 - leaves Canada. UK property worth GBP350,000, plus had GBP100,000 of refurbishment. At 2014 exchange rates (1.80) that's $630,000 value plus $180,000 refurbishment.

Could I claim a capital loss from 2007 to 2014 of:

$660,000 less ($630,000 + $180,000) = -$150,000?

;)

Originally Posted by dgagitw (Post 11197239)

That's a slightly implausible change in valuation for that specific time period except maybe for Northern Ireland...

Originally Posted by dgagitw (Post 11197239)

That's a slightly implausible change in valuation for that specific time period except maybe for Northern Ireland...

Originally Posted by dgagitw (Post 11197239)

That's a slightly implausible change in valuation for that specific time period except maybe for Northern Ireland...

Originally Posted by Novocastrian (Post 11197246)

Or for Norfolk. ;)

Originally Posted by Jingsamichty (Post 11197242)

Implausible or not, if you could produce such valuations, would it fly with the CRA? And can the refurb costs be added to the tax set-off?

Originally Posted by Jingsamichty (Post 11197196)

Jon, what do you make of this? (values for illustrative purposes only)

2007 - became tax resident in Canada. UK property worth GBP300,000. At 2007 exchange rate (2.20) this is worth $660,000.

2014 - leaves Canada. UK property worth GBP350,000, plus had GBP100,000 of refurbishment. At 2014 exchange rates (1.80) that's $630,000 value plus $180,000 refurbishment.

Could I claim a capital loss from 2007 to 2014 of:

$660,000 less ($630,000 + $180,000) = -$150,000?

;)

Originally Posted by Novocastrian (Post 11197277)

You'd need to have kept all the receipts and not have done any renos on the black.

But you'd never do that, oh no. ;)

Edit: thinking about it, I wonder if you'd need to use the exchange rates for the time(s) the improvements were done. Dunno.

Originally Posted by Jingsamichty (Post 11197298)

Jonboy, the font of all tax knowledge, I thankee.

It was a largely hypothetical question, the UK housing market has of course meant that house prices have risen a lot more than my example- even in Norfolk, Novo! I was more curious to see whether the exchange rate fluctuation and refurb costs alone could negate a potential capital gain, and it would seem they can.

All irrelevant in my case as I have never paid any CGT so have nothing to offset a Capital Loss against anyway. Now, if you could offset it against Income Tax, I'd have been very interested... :rofl:

Something for the OP to consider though, before she writes the cheque.

Originally Posted by Novocastrian (Post 11197301)

Yea, that's the catch. A CG loss doesn't equate to a refund, just to an offset against other CGT.

Edit: But since we perhaps have Jon's attention at the moment, do I have any CGT exposure on my soon-to-be retirement home in France? I paid cash for it in 2008 and will be leaving Canada next year. I doubt it's increased in value at all, except for renovations we've done. But should I get it revalued before we leave? I was tax resident in Canada when we bought it, it's never been rented and I haven't reported it on T1135 because it is property for personal use.

Originally Posted by JonboyE (Post 11197385)

If it is personal use property you are OK on the T1135 but yes, there is potential for a capital gain. I tend to be risk averse so if I was in your situation I would get an appraisal - even if it was just from a realtor rather than a qualified surveyor.

Originally Posted by 99problems (Post 11198899)

It seems to me you have been incredibly honest - I simply would not have declared income earned abroad - CRA isn't much brighter than HMRC.