Military pension question
#16
Re: Military pension question
Hi Almost
I plan that my pension will always be taxed in the UK, so under the Taxation Treaty I will not pay any Canadian tax on it. Is this the way you see the Taxation Treaty?
Say I earn £12,000 a year in Pension, take off the UK personal allowance of approx £5,000, then I'm taxed on the remaining £7,000 at 20% (from Apr 2008) makes £1,400 in tax. I declare £12,000 on my Canadian tax return, then deduct it under the tax treaty, so pay no Canadian tax on it.
If I opt to have the pension tax free from the UK I'll escape UK tax but I'll pay Canadian tax at my highest (think they call that "marginal") rate which I expect to be about 38% and on all of the £12,000. That makes about £4,600 ie lots more than when I declare the pension in UK.
Does that add up to you?? There must be some smart brains out there that can see the problem with my simple sums!!
Ex
I plan that my pension will always be taxed in the UK, so under the Taxation Treaty I will not pay any Canadian tax on it. Is this the way you see the Taxation Treaty?
Say I earn £12,000 a year in Pension, take off the UK personal allowance of approx £5,000, then I'm taxed on the remaining £7,000 at 20% (from Apr 2008) makes £1,400 in tax. I declare £12,000 on my Canadian tax return, then deduct it under the tax treaty, so pay no Canadian tax on it.
If I opt to have the pension tax free from the UK I'll escape UK tax but I'll pay Canadian tax at my highest (think they call that "marginal") rate which I expect to be about 38% and on all of the £12,000. That makes about £4,600 ie lots more than when I declare the pension in UK.
Does that add up to you?? There must be some smart brains out there that can see the problem with my simple sums!!
Ex
HTH
#17
Re: Military pension question
Sorry ex-reme but I am sure that on this occasion the advice you have been given about government pensions is inaccurate.
The following link to HM Revenue and Cusoms refers to 'Government Pensions' ( http://www.hmrc.gov.uk/cnr/uk_gov_pensions.htm ). Whilst the advice you were given was correct for most worldwide destinations, Canada is not one of them. It is clearly stated that
"Usually Government Service and Local Authority Service Pensions paid to British nationals living overseas remain taxable in the UK. You will still be eligible to receive full UK Personal Allowances and reliefs.
The main exceptions are Australia, Canada, New Zealand and Cyprus where exemption for Government Service and Local Authority Service Pensions can be claimed".
I will be receiving a Civil Service Pension when/if we move and have been advised by a Tax Advisor in Calgary that my pension has to be declared in Canada and will be taxable in Canada.
This next link is to the HM Revenue and Customs form that needs to be completed once residency in Canada is taken up
( http://www.hmrc.gov.uk/cnr/canada-individual.pdf ).
Not sure how Revenue Canada can find out that you are receiving a pension in the UK if you do not declare it and simply transfer funds from a UK bank when it is paid in. Someone else will no doubt have the answer to that. However, it would be classed as tax evasion if a UK pension was not declared.
Part of my pension is non taxable in the UK as I was retired due to an accident at work. In Canada however, it looks like even this non taxable part becomes taxable, costing me about £4k per year extra in tax if we move. Not pleased about it but not a lot I can do about it either. Only found this out recently hence the when/if we move position.
Still open to being corrected if I am wrong and someone with Canadian tax expertise is out there waiting to comment. Hope I am, could save me 4 grand a year.
The following link to HM Revenue and Cusoms refers to 'Government Pensions' ( http://www.hmrc.gov.uk/cnr/uk_gov_pensions.htm ). Whilst the advice you were given was correct for most worldwide destinations, Canada is not one of them. It is clearly stated that
"Usually Government Service and Local Authority Service Pensions paid to British nationals living overseas remain taxable in the UK. You will still be eligible to receive full UK Personal Allowances and reliefs.
The main exceptions are Australia, Canada, New Zealand and Cyprus where exemption for Government Service and Local Authority Service Pensions can be claimed".
I will be receiving a Civil Service Pension when/if we move and have been advised by a Tax Advisor in Calgary that my pension has to be declared in Canada and will be taxable in Canada.
This next link is to the HM Revenue and Customs form that needs to be completed once residency in Canada is taken up
( http://www.hmrc.gov.uk/cnr/canada-individual.pdf ).
Not sure how Revenue Canada can find out that you are receiving a pension in the UK if you do not declare it and simply transfer funds from a UK bank when it is paid in. Someone else will no doubt have the answer to that. However, it would be classed as tax evasion if a UK pension was not declared.
Part of my pension is non taxable in the UK as I was retired due to an accident at work. In Canada however, it looks like even this non taxable part becomes taxable, costing me about £4k per year extra in tax if we move. Not pleased about it but not a lot I can do about it either. Only found this out recently hence the when/if we move position.
Still open to being corrected if I am wrong and someone with Canadian tax expertise is out there waiting to comment. Hope I am, could save me 4 grand a year.
#18
Just Joined
Joined: May 2007
Posts: 25
Re: Military pension question
"Usually Government Service and Local Authority Service Pensions paid to British nationals living overseas remain taxable in the UK. You will still be eligible to receive full UK Personal Allowances and reliefs.
The main exceptions are Australia, Canada, New Zealand and Cyprus where exemption for Government Service and Local Authority Service Pensions can be claimed".
Sadly it looks like I'll lose the double personal allowance
Ex
#19
Just Joined
Joined: May 2007
Posts: 25
Re: Military pension question
I did wonder if they might catch me for an additional amount of tax to bring it up to what I would have been taxed if I declared it all in Canada. From the next post it looks like I'll be declaring it all in Canada anyway!
Ex
#20
Just Joined
Joined: May 2007
Posts: 25
Re: Military pension question
Taxation, particularly the double-taxation treaty, appears to be a subject of much confusion. Maybe we need a Wiki article on it.
I live in Canada. I am resident and domiciled in Canada. I file my tax return in Canada. My tax return reports my worldwide income. None of that income arises in Canada. Some of my income is paid to me gross. Some (from a trust fund) has had tax deducted in the UK before I see it.
When I file my Canadian tax return, I declare my total gross income. I also declare what tax has been deducted in the UK. That is knocked off my tax hit here.
You don't get done over twice, unless you fail to estabish where you are resident for tax purposes.
I live in Canada. I am resident and domiciled in Canada. I file my tax return in Canada. My tax return reports my worldwide income. None of that income arises in Canada. Some of my income is paid to me gross. Some (from a trust fund) has had tax deducted in the UK before I see it.
When I file my Canadian tax return, I declare my total gross income. I also declare what tax has been deducted in the UK. That is knocked off my tax hit here.
You don't get done over twice, unless you fail to estabish where you are resident for tax purposes.
When you declare UK income that has been taxed in UK, do you declare the income after UK tax is deducted, then declare what tax you have paid on it. Or, do you just declare the UK income to the Canadian tax man and state that you have already paid UK tax? Hopefully I've explained that well enough?
The point I'm trying to get to is: is the Canadaian tax man interested in HOW MUCH UK tax you have paid, or is he just happy that UK income has been declared to the UK tax man regardless of how much tax has been paid.
Appreciate your words of wisdome!
Ex
#21
Just Joined
Joined: Mar 2006
Location: Calgary
Posts: 12
Re: Military pension question
I declared to Revenue Canada the amount I received in the UK after tax and also stated the tax I paid to the UK Inland Revenue Service. Revenue Canada sent me a bill for tax I owed them plus interest as I had not declared the amount to them as gross. This meams I paid tax twice but as I have previouly stated I will get all my UK tax back after having filed 2 Canadian tax returns and sending my form FD3 to the UK.
I did query this with them in a telephone conversation but it appears this is the way the system works. At least in my case!!!!
I did query this with them in a telephone conversation but it appears this is the way the system works. At least in my case!!!!
#22
Forum Regular
Joined: Jul 2003
Posts: 204
Re: Military pension question
I declared to Revenue Canada the amount I received in the UK after tax and also stated the tax I paid to the UK Inland Revenue Service. Revenue Canada sent me a bill for tax I owed them plus interest as I had not declared the amount to them as gross. This meams I paid tax twice but as I have previouly stated I will get all my UK tax back after having filed 2 Canadian tax returns and sending my form FD3 to the UK.
I did query this with them in a telephone conversation but it appears this is the way the system works. At least in my case!!!!
I did query this with them in a telephone conversation but it appears this is the way the system works. At least in my case!!!!
#23
Re: Military pension question
Part of my pension is non taxable in the UK as I was retired due to an accident at work. In Canada however, it looks like even this non taxable part becomes taxable, costing me about £4k per year extra in tax if we move. Not pleased about it but not a lot I can do about it either. Only found this out recently hence the when/if we move position.
#24
Re: Military pension question
Hi Edna,
you have offered me a glimpse of hope and I would be gratefull if you could expand a little on your reply either on this thread or by sending me a pm.
Is your pension a civil service ill health retirement one with an element of injury benefit? If so could you give me the name of your expensive accountant so that I can find out how he arrived at his conclusion.
This tax issue is a worry and it would be a big weight off my mind if I could get some official confirmation that my pension will not be taxable in canada.
Thanks.
By the way, is it Bucket or Bouquet lol
John
you have offered me a glimpse of hope and I would be gratefull if you could expand a little on your reply either on this thread or by sending me a pm.
Is your pension a civil service ill health retirement one with an element of injury benefit? If so could you give me the name of your expensive accountant so that I can find out how he arrived at his conclusion.
This tax issue is a worry and it would be a big weight off my mind if I could get some official confirmation that my pension will not be taxable in canada.
Thanks.
By the way, is it Bucket or Bouquet lol
John
#25
Re: Military pension question
Hi Edna,
you have offered me a glimpse of hope and I would be gratefull if you could expand a little on your reply either on this thread or by sending me a pm.
Is your pension a civil service ill health retirement one with an element of injury benefit? If so could you give me the name of your expensive accountant so that I can find out how he arrived at his conclusion.
This tax issue is a worry and it would be a big weight off my mind if I could get some official confirmation that my pension will not be taxable in canada.
Thanks.
By the way, is it Bucket or Bouquet lol
John
you have offered me a glimpse of hope and I would be gratefull if you could expand a little on your reply either on this thread or by sending me a pm.
Is your pension a civil service ill health retirement one with an element of injury benefit? If so could you give me the name of your expensive accountant so that I can find out how he arrived at his conclusion.
This tax issue is a worry and it would be a big weight off my mind if I could get some official confirmation that my pension will not be taxable in canada.
Thanks.
By the way, is it Bucket or Bouquet lol
John
I have sent you a pm
#26
Forum Regular
Joined: Oct 2007
Location: Richmond, Vancouver, BC
Posts: 161
Re: Military pension question
Hi Byreboy and other ex military heading Canada way,
I've just been to the Financial Aspects of Resettlement (FAR) brief last week and asked this exact question of the Forces Pension Society guy and the Independent Financial Adviser who followed him. (We're Canada bound in August this year). Both of them had come across this issue many times before.
Their advice was that you/we cannot "transfer" the military pension to Canada, it always has to be paid by Paymaster 1864 (I think) in Crawley. You can either have it paid into a UK bank account and do the currency transfer yourself or have it exchanged by the Paymaster into Canadian Dollars and paid directly into a Canadian Bank each month. The Paymaster uses a commercial org to do that, so I was told the exchange rate is better than the tourist rate (but obviously will vary each month) and the cost is low (£5 ish I think per month, but I've left my notes at work and am on leave this week so can't check them.)
Tax - good point, little tricker. The double taxation treaty with Canada means that it will not be taxed twice (no 2 year wait heard of, not sure why that is mentioned, although more later). As the military pension is a "Government" pension, the general rule for the UK is that it is taxed in the source country ie UK. On your Canadian tax return you add in the amount you are paid after UK tax deducted (use the Canadian $ equivalent) then deduct the same amount further down the page, listing the UK/Canada Tax Treaty as the reason for the deduction. You should then not be taxed in Canada on that amount.
Do you get both UK and Canadian Personal Allowances? Here's the bit I'm crossing my fingers for. Having your pension taxed in the UK means you get the full UK personal allowance, then are taxed at the 10% and 22% tax rates (for this year anyway). I can then hopefully use my full Canadian personal allowance against my Canadian income, thus reducing my overall tax bill.
I believe from the FAR brief that it is possible to have your UK military pension paid gross (ie before UK income tax deduction) when you are non resident for tax purposes in the UK. You would then not be eligible to claim the UK Personal Allowance and would have to add the full amount to your Canadian income on your Canadian tax return, probably increasing the total amount of tax paid. It is possible that this cannot be done on your FIRST Canadian tax return, thus the point made about having to wait two years? During the first year you should pay UK income tax only. I also think that this comment on the 2 year wait may be getting confused with electronic income tax filing in Canada. I believe you cannot file your first tax return electronically. Not sure - can anyone else comment? I may be way off here, as I've not done this yet. It might also be to do with being non resident in the UK so the UK Government will not let you have your pension payed gross??
Hope that makes sense. Would love to hear from any UK ex military who are already doing this. Double personal allowance ... am I off with the little people??? - Tell us quietly as I don't want the system to change!!!
Arte et Marte
I've just been to the Financial Aspects of Resettlement (FAR) brief last week and asked this exact question of the Forces Pension Society guy and the Independent Financial Adviser who followed him. (We're Canada bound in August this year). Both of them had come across this issue many times before.
Their advice was that you/we cannot "transfer" the military pension to Canada, it always has to be paid by Paymaster 1864 (I think) in Crawley. You can either have it paid into a UK bank account and do the currency transfer yourself or have it exchanged by the Paymaster into Canadian Dollars and paid directly into a Canadian Bank each month. The Paymaster uses a commercial org to do that, so I was told the exchange rate is better than the tourist rate (but obviously will vary each month) and the cost is low (£5 ish I think per month, but I've left my notes at work and am on leave this week so can't check them.)
Tax - good point, little tricker. The double taxation treaty with Canada means that it will not be taxed twice (no 2 year wait heard of, not sure why that is mentioned, although more later). As the military pension is a "Government" pension, the general rule for the UK is that it is taxed in the source country ie UK. On your Canadian tax return you add in the amount you are paid after UK tax deducted (use the Canadian $ equivalent) then deduct the same amount further down the page, listing the UK/Canada Tax Treaty as the reason for the deduction. You should then not be taxed in Canada on that amount.
Do you get both UK and Canadian Personal Allowances? Here's the bit I'm crossing my fingers for. Having your pension taxed in the UK means you get the full UK personal allowance, then are taxed at the 10% and 22% tax rates (for this year anyway). I can then hopefully use my full Canadian personal allowance against my Canadian income, thus reducing my overall tax bill.
I believe from the FAR brief that it is possible to have your UK military pension paid gross (ie before UK income tax deduction) when you are non resident for tax purposes in the UK. You would then not be eligible to claim the UK Personal Allowance and would have to add the full amount to your Canadian income on your Canadian tax return, probably increasing the total amount of tax paid. It is possible that this cannot be done on your FIRST Canadian tax return, thus the point made about having to wait two years? During the first year you should pay UK income tax only. I also think that this comment on the 2 year wait may be getting confused with electronic income tax filing in Canada. I believe you cannot file your first tax return electronically. Not sure - can anyone else comment? I may be way off here, as I've not done this yet. It might also be to do with being non resident in the UK so the UK Government will not let you have your pension payed gross??
Hope that makes sense. Would love to hear from any UK ex military who are already doing this. Double personal allowance ... am I off with the little people??? - Tell us quietly as I don't want the system to change!!!
Arte et Marte
#28
Re: Military pension question
Just a quick one
I will have full pension from July 08
I will be going over on a temp work permit on the PNP route and will not have Perm residency until approx 18 months...hopefuly
Any ideas as to how this will affect me as the word "Resident" has been banded about.
Cheers Dave
I will have full pension from July 08
I will be going over on a temp work permit on the PNP route and will not have Perm residency until approx 18 months...hopefuly
Any ideas as to how this will affect me as the word "Resident" has been banded about.
Cheers Dave
#29
Re: Military pension question
Hi All
Very interesting info, I was wondering what to do about my Mil pension. Can anyone confirm that all this does not effect the inflation uplift at 55. Would hate to los that as I don't want to have to work till I die
Regards
Very interesting info, I was wondering what to do about my Mil pension. Can anyone confirm that all this does not effect the inflation uplift at 55. Would hate to los that as I don't want to have to work till I die
Regards
#30
Re: Military pension question
Just a quick one
I will have full pension from July 08
I will be going over on a temp work permit on the PNP route and will not have Perm residency until approx 18 months...hopefuly
Any ideas as to how this will affect me as the word "Resident" has been banded about.
Cheers Dave
I will have full pension from July 08
I will be going over on a temp work permit on the PNP route and will not have Perm residency until approx 18 months...hopefuly
Any ideas as to how this will affect me as the word "Resident" has been banded about.
Cheers Dave