feelbritish

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

bats

Don't sell it.

Gozit

Should I post my grandparents' issue in here too or in it's own thread ?

rivingtonpike

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?

JAJ

And the original thread, to avoid duplication of comments, etc. is:
http://britishexpats.com/forum/showthread.php?t=829817

dgagitw

That's not an option. You are charged CGT as if you did sell it at the point you leave Canada.

OP - some ideas:

- if you've been in Canada less than 5 years then property you never bought into the country is excluded from the rule
- check into the primary residence thing, although it sounds unlikely to work to me
- move back to the UK near the start of January. That should minimise the hit I think. (Check that one with a tax accountant).

JonboyE

AFAIK there is no way around it. JAJ's comment on exchange rates is very pertinent. The gain may be a lot less that you fear. The maximum tax bill will be 23.5% of the gain in Canadian dollars. Less if you don't have much other income in the year.

The way I prefer to think of it is that you get to keep 76.5% or more of the gain you accrued for doing, well, absolutely nothing.

JonboyE

Just to add to an earlier suggestion you can minimize tax by leaving Canada at the beginning of January when you do not have any other taxable income in the year. Using 2013 rates, if your capital gain in $ was 500,000 then you would both pay $35,000 in tax. 70/500 is 14%. Not unreasonable IMO.

feelbritish

Thanks JonboyE was waiting for your input! Thank you. I appreciate the suggestion that we leave in January. We have to pay it so we now need to know when is the best time to leave! And pay less tax.

So I guess I may not be taking the Queen Mary 2 after all!

Jingsamichty

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

dgagitw

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.

Jingsamichty

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

feelbritish

yes, we have declared property we own since we arrived and have also paid tax on the rental income we have received from it.

feelbritish

That is something we thought of as well, but do not want something like this hanging over our heads and any future come back. UK also taxes us on CGT so we have to make sure that we don't get taxed twice!

JonboyE

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.