I have a question re inheritance tax...what is the situation in Canada if your relatives who are resident in the UK leave you large some of money upon their death?...as far as im aware the estate will be taxed by the Uk govt at 40% of anything over £250,000 aprrox..so if the estate is valued at £400,000 40% will be paid on £150,000....will you then get taxed again by the Canadian Govt under capital gains tax on any assets or cash that you inherit..even though the orginal estate has been taxed at sourced by the UK Govt?....any thoughts would be much appreciated.

Canada and the UK have a tax treaty that eliminates double taxation.

UK Inheritance Tax is an estate tax, so the fact you are living in Canada is irrelevant (for UK purposes) as the estate is in the UK.

You need to check what the capital gains tax "base cost" will be deemed as. It seems that under Canadian law, when a person dies they are deemed to have sold their property at market value. Hence you would only be chargeable to capital gains on future gains.
http://www.cra-arc.gc.ca/tax/individ...ed/menu-e.html

You would need to research further to see if this applies to inherited assets from outside Canada. Check the double tax treaty.

Contrary to what someone else has said, don't automatically expect a double tax treaty to resolve all interactions between inheritance tax and capital gains tax.

The nil band was £285,000 I'm sure its now £300'000 after the last budget, and as far as I'm aware you will only pay tax in one country although i'm not 100% sure which one.



Regards
Danny

I've recently received part of a UK estate. IHT was paid as normal in the UK. In the time between date of death and date of transfer to me (which was almost a year!) there's been a capital gain. I didn't have to pay capital gains tax in the UK (according to my solicitor's office there's no CGT if I don't return in the next 5yrs), but I likely will have to pay it in Canada. I'm trying to get my Canadian accountant to tell me whether CGT is payable from date of transfer in Canada or from date of death, but nobody seems to know. It'll be a nice/nasty surprise

Someone has judged my reply to yours as too brief. To give you some more information. When you enter Canada you will be deemed to have acquired your proprety at its then market value. Any gains to be taxed in Canada will be those gains that have arisen on the taxable property you have been deemed to have acquired upon entry. Canada taxes on your world wide income and does not have any inheiritance taxes. You can investigate the tax treaty as suggested, but don't expect to find your answer unless you are a tax practitioner.

A complete answer to your question is not possible here as the facts have not been completely presented by you. As a professional accountant, I would advise you to make an appointment with Ernst and Young, KPMG, PriceWaterhouseCoopers or Deloitte if you wish to discuss tax planning in advance of your move. I would be very happy to give you a referral if you like. Planning your move from a tax perspective may be a wise move for you and save you disappointment in the future. I also believe that this question has been asked a number of times over the last few years and a search of the previous posts may provide you some further information.

But none of this answers the question that was asked. The OP is asking about the capital gains situation when property is inherited after becoming resident in Canada.


Why on earth would an individual want to start dealing with a huge Big 4 firm rather than a competent local tax practitioner?

As I understand it there is no inheritance tax in Canada, so once the UK estate has paid the chancellor his chunk you wont pay again in Canada. Dont know about CGT though.. I expect a feds get there pound of flesh.

My dad is now trying to minimise the amount the chancellor will get when he passes.

Plan A is to spend as much of it as he can now to get closer to the £300k+ threshold.

Plan B is to try and get some of it offshore in Canadian funds for the grandchildren. As I understand this there is no tax on this gifted money as it comes into Canada..its not income, but if he dies within 7 years the UK government can prorate inheritance tax on it.

Any other advice on planing for the inevitable would be gratefully received if you have tips or experience at minimising the death duties. I guess we should also seek professional advice (although my eldest brother is an Accountant in the UK)

Plan A seems to involve him paying for the whole extended family to have a Caribbean Christmas this year, which will be something to look forward to