Christo21

Hi all

spoke to CRA on the phone today and the guy said I should apply for foreign tax credits for my NI contributions. Wondering if there are any users here, living in Canada and working for a uk company, still on payroll in the uk and paying NI, that could shed some light on it ?

Siouxie

Hello and welcome to BE!

This page of the CRA website covers this, to a degree - it says

https://www.canada.ca/en/revenue-age...ributions.html

We have a few members who undertake work and are still on payroll in the UK, while residing in Canada - so hopefully they can advise you.
Generally it's thought better to work as a freelancer and use the tax deductions available here - then pay for NI contributions (for pension purposes) separately. https://www.gov.uk/national-insurance-if-you-go-abroad
https://www.gov.uk/voluntary-nationa...-contributions

Christo21

Hey Siouxie, thanks for your reply!! That is what I had found before and is why I did not try and claim tax credits for it, but this CRA person on the phone seemed to believe that because the amount I am paying for National Insurance comes off my PAYE pay slip and changes depending on how much I earn, then perhaps I am entitled to tax credits for it.

Something else that is on my mind is someone else on the big bad internet insinuated that I am breaking the law by not using a Canadian payroll system (pointing me towards Income Tax Act s. 153, Regulations s. 100 to 105, Canada Pension Regulations s. 22 and Employment Insurance Act s. 5 although I am not doing well at deciphering this).

Would love to hear from people in similar situations that might be able to shed some light for me!

With regards to freelance/employment, I was fortunate enough to get furlough for this past year and I'm not sure I would have had any support had I not been employed.

Other questions: Do I legally have to pay EI premiums?

Farmer on a bike

In the UK NI contributions are not tax deductible and the same applies in Canada. Any verbal information from a CRA agent is best followed up by a request for a 'written determination'. At the least note the agents badge number, date and time and the advice, this may not hold up though if the information was incorrect. Getting it in writing is always best, though it takes longer.
To claim foreign tax credit you will need a certificate of the tax paid from the UK.

https://www.canada.ca/en/revenue-age...ax-credit.html

No problem not using source deductions for paying taxes in Canada, so long as you file a return at the end of the year and CRA get what they are due. There are advantages and disadvantages, self employed can claim deductions for legitimate business expenses, use of home as office, part of utilities etc. Claiming too high a proportion of home as office can cause complications when you sell and may result triggering capital gains tax.
There is no 'self employed' registry, other than local municipality for a business license and with CRA for a business number if it is required.
If GST registered (Over $30k a year income) you have to file returns and can claim some GST back, you would not charge GST to an overseas client.
If you need a GST account, you have to register for a business number and GST account with CRA.
https://www.canada.ca/en/revenue-age...er-charge.html
As self employed you are responsible for both employer and employee costs of any CPP and EI due.
EI for self employed is voluntary (not if you are incorporated, you are then an employee).

https://www.canada.ca/en/services/be...d-workers.html

Always worthwhile consulting an accountant (CPA) and to get help filing taxes.A good one should save more than they cost. I would avoid 'tax filers' who are not qualified accountants.

Christo21

Thanks for that. He said himself your best way of finding out is asking for a reassessment but that seems like a lot of effort when its pretty clear NIC aren't deductible.

So essentially I am weighing this up...

As an employee I earn £32k, get 20 days holiday, 10 days sick pay (maybe useful if I catch Covid), 2% employer contributions to pension. (Also think I can claim a little bit of money as working from home but my employer needs to fill out a form). How would one figure out how much this is worth if I went self employed? Do self-employed people figure out how much their holiday is worth and tack that onto their monthly invoice and just take unpaid holiday when they want? Sorry I don't understand this tax etc world very much!

As an employee of a UK company, I pay pension over there. Therefore it's okay that I don't do any pension contributions over here? As someone that lives overseas, can I stay on payroll and not pay National Insurance, but pay the £741 fill in fee? Would this be beneficial or am I better off paying more and getting more when I am old?

As an employee of a UK company, am I legally obliged to pay EI premiums?

Sorry so many questions, barely scratches the surface of what my brain doesn't understand!

Oh one more. If a computer is tax deductible as a self employed person - does this mean I get the whole amount back as tax credit or just part of it?

Farmer on a bike

You are blending self-employed with employee and getting somewhat muddled. Each persons circumstances are different. As an employee it quite different to being self-employed, you need to decide which is best for you. Each one has different answers to your questions.

If you are self-employed, you would bill gross amount and sort your own expenses and taxes. If you are employed, employer makes deductions, you file a return here and claim a foreign tax credit. Very few expenses allowed. You end up paying any difference in tax to CRA if more tax would be paid in Canada. If less tax would be paid in Canada, you just help sure up the UK government, no refunds.

You will pay Canada Pension Plan (CPP) here as an employee of a foreign company or as self-employed.

Computers for self-employed can be deducted as an expense, capitalised or expensed, depending on cost. You don't get anything back, it is a deduction from income that can help reduce taxes.

I would again, highly recommend speaking to an accountant CPA). You can give them your full circumstances, they will need this to advise. There is no way for an Internet forum to give you the best advice for your circumstances. It could only end up confusing you more and steering you in the wrong direction.

Christo21

No I totally get that and plan to go to a chartered accountant this week, hoping to find one with experience of this.

Sorry for the expense thing again - if a laptop costs $2000 do you get $2000 off your tax bill or a small percentage? (If you're self-employed obviously)

I have already paid taxes here instead of the UK, so there's that.

If I have a pension plan in the UK plus NI contriutions - do I still have to have a CPP as well?

Okay no more questions, thank you for your help

Siouxie

There is free software you can use to both prepare your invoices and for book-keeping as well as Tax return and submission.. no need to pay a chartered accountant.
A laptop is capital asset, you would claim a percentage each year for the amount of depreciation (Capital Cost Allowance) https://www.canada.ca/en/revenue-age...allowance.html
CPP is mandatory... you get a tax credit for the 'employer' part that you pay.

Official - CPP for self employed details: https://www.canada.ca/en/revenue-age...-employed.html
Official - EI for self employed details: https://www.canada.ca/en/services/be...d-workers.html

Farmer on a bike

A $2000 laptop would be capitalised. If it is a Class 50 (55% CCA rate), you could take $1100 off reportable income in year 1 and the remaining 45% in year 2. e.g. if income in year 1 was $30,000 - $1100, nett taxable income would be $28,900. There are many CCA classes depending on the equipment and its purpose. This explains CCAs and has the appropriate forms. https://www.canada.ca/en/revenue-age...rms/t2125.html

I would strongly suggest talking to an accountant. Too few small business owners fully understand the purpose or value of an accountant, instead opting for free software and internet forums.

Accountants to help figure out strategies and tax planning. They know tax regulations and any refundable and non refundable tax credits you may be able to apply for. They make for expensive bookkeepers though, a function many small business owners carry out themselves.

Christo21

Thanks for your input all, much appreciated