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Military Pensions

Old Nov 4th 2008, 8:57 pm
  #31  
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Default Re: Military Pensions

Originally Posted by Ad 12345 View Post
You have no choice where you declare this income. You must declare any and all income to the CRA from the day you land in Canada. There is a good relationship between the UK and Canadian tax people and they will catch you. However, you cannot be double taxed by both countries and will be able to reclaim any tax paid to the UK tax man.

On you T1 Canadian Tax Return you have to declare all World Wide income.

Adrian
Note that you will likely have to pay Canadian tax on your UK pension for some months before you get the UK tax back. I'm in that situation now, but hopefully with my UK tax return going in soon that will change and I will get my UK pension free of UK tax.
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Old Nov 11th 2008, 7:52 pm
  #32  
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Question Re: Military Pensions

'Roger so far' with the quality info, great stuff, many thanks to all.

What about if I receive a medical pension that is paid in the UK tax free; would I be taxed on that once I live in Canada or is there also a tax allowance for medical pensions similar to UK?


Also, with regard to the 'lump sum', am I correct to understand that I need to have that actually in my bank account before I move to Canada (i.e. become resident)?

If so, it kinda messes with my plans; I was going to move over during the 20+ weeks I will be 'off work' prior to my actual discharge date. Furthermore, do I need to be arranging to stay in UK for 28 days after my official discharge date, as I have been told that the lump sum can take up to 28 days to be paid into my bank?? (What if there was a delay and it was paid late, after I had flights booked???)
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Old Nov 11th 2008, 9:08 pm
  #33  
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Default Re: Military Pensions

Originally Posted by marcustandy View Post
'Roger so far' with the quality info, great stuff, many thanks to all.

What about if I receive a medical pension that is paid in the UK tax free; would I be taxed on that once I live in Canada or is there also a tax allowance for medical pensions similar to UK?


Also, with regard to the 'lump sum', am I correct to understand that I need to have that actually in my bank account before I move to Canada (i.e. become resident)?

If so, it kinda messes with my plans; I was going to move over during the 20+ weeks I will be 'off work' prior to my actual discharge date. Furthermore, do I need to be arranging to stay in UK for 28 days after my official discharge date, as I have been told that the lump sum can take up to 28 days to be paid into my bank?? (What if there was a delay and it was paid late, after I had flights booked???)
This issue has caused considerable controversy. I live in Ottawa and visited the CRA in Walkley Rd (details on line as well as a contact number for advice) and was informed that Article 47 of the Convention between Govt of Canada and UK allowed the money to be received tax free after landing (reclaim at line 426 of your T1 tax rtn). Many others on this website have strongly opposing views and some suggest illegal practices that will result in 1% per month interest charges if you are audited. My advice is, whilst there is some excellent advice at britishexpats, on the issue of pension, you are best talking to those who do this for a living and will audit your T1. NB First T1 must be hard copy submission, tax year is calendar year and your Blue Cross Medical Insurance is a non refundable tax deduction. Enjoy Canadian Tax!
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Old Nov 11th 2008, 9:20 pm
  #34  
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Default Re: Military Pensions

Tax doesnt have to be taxing!
I am personally going to use my resettlement time in the UK and go over for interviews etc during my last 6 months. I am then going to wait in the UK until my lump sum is in the UK bank. I will then make my move.
I believe that this method ensures it is tax free?
Some ppl are on about using the period before leaving the army officially to move to Canada I am not 100% but is there not some sort of restriction on immigration whilst employed with the UK forces so you cannot start the process until you have left the British Army?
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Old Nov 11th 2008, 9:27 pm
  #35  
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Default Re: Military Pensions

Originally Posted by Ad 12345 View Post
This issue has caused considerable controversy. I live in Ottawa and visited the CRA in Walkley Rd (details on line as well as a contact number for advice) and was informed that Article 47 of the Convention between Govt of Canada and UK allowed the money to be received tax free after landing (reclaim at line 426 of your T1 tax rtn).
Line 426 is not on the T1 return. It is on Schedule 1 and is used to claim the overseas employment tax credit calculated on form T626. It is nothing whatsoever to do with military pensions from the UK.
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Old Nov 11th 2008, 9:27 pm
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Default Re: Military Pensions

Originally Posted by dinger24 View Post
Tax doesnt have to be taxing!
I am personally going to use my resettlement time in the UK and go over for interviews etc during my last 6 months. I am then going to wait in the UK until my lump sum is in the UK bank. I will then make my move.
I believe that this method ensures it is tax free?
Some ppl are on about using the period before leaving the army officially to move to Canada I am not 100% but is there not some sort of restriction on immigration whilst employed with the UK forces so you cannot start the process until you have left the British Army?
Agreed it is the safest route.
No restriction in emmigrating but restrictions on starting work, especially for another country, if you do.
My settlement cse was Tax in Canada, a 4 month cse which prepares one well for Canadian Tax and if you get 80% on the exams, could lead to a job as well!
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Old Nov 11th 2008, 9:31 pm
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Default Re: Military Pensions

Originally Posted by JonboyE View Post
Line 426 is not on the T1 return. It is on Schedule 1 and is used to claim the overseas employment tax credit calculated on form T626. It is nothing whatsoever to do with military pensions from the UK.
You again ... you are as ever correct, I was refering to the generic tax return booklet which contains all sorts of very exciting forms which I am certain you could bore people about. I was just repeating verbatim what the CRA guy told me, and I believe he was being generalistic about the booklet as well. I stand corrected and hang my head in shame.
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Old Nov 11th 2008, 9:31 pm
  #38  
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Default Re: Military Pensions

Originally Posted by Ad 12345 View Post
My settlement cse was Tax in Canada, a 4 month cse which prepares one well for Canadian Tax and if you get 80% on the exams, could lead to a job as well!
My head is buzzing reading this post so I dont think I could handle 4 months
Do you have any info on this course - just curious - it may be another avenue of interest?
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Old Nov 11th 2008, 9:33 pm
  #39  
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Default Re: Military Pensions

Originally Posted by Ad 12345 View Post
You again ... you are as ever correct, I was refering to the generic tax return booklet which contains all sorts of very exciting forms which I am certain you could bore people about. I was just repeating verbatim what the CRA guy told me, and I believe he was being generalistic about the booklet as well. I stand corrected and hang my head in shame.
For clarity, you cannot claim British Pension as tax free on Line 426 of the Schedule 1 as this is income and as such is taxable. Not the subject that was being discussed but hey, let's confuse the issue eh!
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Old Nov 11th 2008, 9:33 pm
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Default Re: Military Pensions

Originally Posted by dinger24 View Post
Tax doesnt have to be taxing!
I am personally going to use my resettlement time in the UK and go over for interviews etc during my last 6 months. I am then going to wait in the UK until my lump sum is in the UK bank. I will then make my move.
I believe that this method ensures it is tax free?...
It should do. As long as you are still resident in the UK (and not Canada) for tax purposes on the day you receive the lump sum it is of no interest or concern to the Canadian tax authorities.
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Old Nov 11th 2008, 9:35 pm
  #41  
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Default Re: Military Pensions

Originally Posted by JonboyE View Post
It should do. As long as you are still resident in the UK (and not Canada) for tax purposes on the day you receive the lump sum it is of no interest or concern to the Canadian tax authorities.
Yes - this is my intention for tax purposes!
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Old Nov 11th 2008, 9:56 pm
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Default Re: Military Pensions

Originally Posted by Ad 12345 View Post
You again ...
'Fraid so. There are a lot of military and ex-military people who use this site and I've read several times that the taxation of their pensions and lump sum are make and break issues when deciding on the viability of immigration to Canada.

I am happy to give you credit when you are right but I disagree with quite a lot of what you say, particularly in regard to the application of the Tax Treaty. As a professional, who deals with people's taxes day in and day out, I will continue to give my interpretation if I think this will be useful to other readers.

As I said in an earlier post, this is a specialist area of tax and, unfortunately, you can't rely on the information givers at the CRA to have an intimate knowledge. (And again, I am not claiming a particular expertize in this matter, but I have read the law and the treaties and have formed my opinion on this basis.)

No one should rely on anonymous posters on a website for important and potentially costly matters such as this. My suggestion for anyone concerned is to write to the International Tax Services office for a written ruling. I've got $5 saying I am right.
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Old Nov 12th 2008, 5:27 am
  #43  
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Default Re: Military Pensions

Originally Posted by dinger24 View Post
Tax doesnt have to be taxing!
I am personally going to use my resettlement time in the UK and go over for interviews etc during my last 6 months. I am then going to wait in the UK until my lump sum is in the UK bank. I will then make my move.
I believe that this method ensures it is tax free?

Some ppl are on about using the period before leaving the army officially to move to Canada I am not 100% but is there not some sort of restriction on immigration whilst employed with the UK forces so you cannot start the process until you have left the British Army?
I had a good phone call just yesterday with an IERO (not my local 'failure') from JHQ - a very helpful chap!

If I go too much in detail it will take this thread off topic so I'll go start another here.

So, can we assume that Canada doesn't recognise a medical pension as 'tax free'? (Subject to consulting a 'professional', I know!)

Last edited by marcustandy; Nov 12th 2008 at 6:55 am. Reason: Included the link to another topic ref Ex-Military moving to Canada.
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Old Nov 15th 2008, 1:32 pm
  #44  
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Default Re: Military Pensions

No one should rely on anonymous posters on a website for important and potentially costly matters such as this. My suggestion for anyone concerned is to write to the International Tax Services office for a written ruling. I've got $5 saying I am right. [/QUOTE]

This is the best advice I have seen on this topic.
I changed my plans for coming to Canada so that the money was in the bank before I left. This way there are no nasty surpises later when you get your first tax return and tax bill. You may interpret the rules how you like but there appears to be no hard and fast formula for this so you could think one thing and the tax people another. I did not want my move overshadowed by the thought of a nasty bill just for the sake of getting to Canada more quickly.

It is everybodies personal choice and they must accept the consequencies of their decision.

My lump sum was in the bank seven day after my official discharge date and if you book a flight with Air canada, more expensive I admit, it is chanageble free up to 2 hours before departure time. You also get better luggage allowance.

Think long and hard everybody and take your circumstances into account the only hard and fast thing on the subject of lum sums is that if you get it before you leave it is tax free!!!!!! anything else is down to interpretation of the canadian tax office. If they won't give their own soldiers a tax free lump sum are they going to give you one.
My $5 is with you johnboy.
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