Iron Geezer

Hi, I believe due to new rules introduced two years ago that I am now tax resident in the UK as well as Canada due to a stay of more than 120 days in a tax year two years ago, and having a house in the UK where I can stay when in the country. I therefore have to pay tax on my world-wide income in the UK, and have to fill out the 'Foreign' income pages of the UK tax return. I do believe in paying fair taxes but I am having significant difficulty completing information on Canadian income on the UK form.

I would appreciate any feed back on some questions I have from trying to fill in the Foreign income pages on the UK tax return.

1. The UK and Canadian tax years are different, 6 April to 5 April in the UK but calendar year in Canada. The UK tax return form requires income (and tax paid overseas) for the UK tax year but I only know the full amount of Canadian tax I have paid after I submit my Canadian tax return at the end of the calendar year. On the UK form I could just submit income and tax paid from my last Canadian tax return, or income for the UK tax year and Canadian tax paid for the calendar year but this is not what they are asking for.

2. My wife and I are pensioners and we utilize splitting of our Canadian pensions. Do we put down the pension split as our actual pension income on our UK tax return or the values before the split adjustment?

3. RRSP and TFSA interest does not have to be reported on Canadian tax returns. Can this also be ignored for the UK tax return or must it be reported and hence taxed?

4. Would dividend income be reported on the UK tax form as the actual amount or as the taxable amount with the associated tax credit, as reported on a Canadian tax return.

Any information, suggestions or experiences on this topic would be welcomed.

JonboyE

It is many years since I left the UK so take any reference to UK taxation with a large pinch of salt. It will be worth consulting with someone who knows what they are talking about. I have not got the time to go into too much detail now but some thoughts:

You cannot be tax-resident in both the UK and Canada at the same time. Article 4 of the tax treaty sets out the rules for establishing your residence for tax purposes and this is superior to national laws.

I am not sure how it works in the UK now, but if this was for Canadian taxes you would make the best estimate you could. If, when you know the real numbers, it turns out that you owe more you would write and explain and pay the balance owing. TaxTips.ca - The Facts on Tax for Canadians has an excellent calculator. It takes a few minutes to work out how to use it but if you made your estimate using this and keep a print it will show that you have done due diligence if there is ever a problem.

This is an interesting point. Pension splitting is Canadian Law. I can't see how it would apply in the UK.

No it cannot. Income within an RRSP or TFSA is taxable in the UK.

The way dividends are taxed in the UK has change very recently. They are taxed at a special rate and do not have an associated tax credit. If the dividend is from a Canadian source the Canadian payer may withhold 15% non-resident tax but you can claim this as a foreign tax credit on you UK return. Otherwise I would put the actual amount you received. Like the pension splitting, what Canada considers as the taxable amounts should not be relevant when completing a UK tax return

Iron Geezer

Thanks for that, there is some useful information there.

The change in UK residency rules two years ago made it more likely that people would be considered UK resident even though they had stronger ties to another country. Once you become UK resident under the new rules .....

"1.3 When you are UK resident you are normally taxed on the arising basis of taxation. This means that all your worldwide income and gains will be taxable in the UK. Therefore, even if your foreign income and gains have already been taxed in another country they will still be taxable in the UK and you must declare all of your foreign income and gains on your tax return."

This is from HMRC document RDR1, which goes on to address double taxation agreements as a mechanism for off-setting foreign tax paid, rather than determining which country can tax.

"1.4 In many cases, relief is given in the UK for foreign tax paid on foreign income and gains under the provisions of the relevant Double Taxation Agreements (DTAs) or via unilateral relief."

I think the DTA does allow you to avoid being taxed on some types of income in either the UK or Canada, but this is after some form filling to establish which country you are resident in, and applies to future income after the forms have been completed and processed.

JonboyE

I have not read the document but if that is what it says, it is wrong. The tax treaty sets out what income can be taxed by what country and, in some instances, at what rate. It does also address double taxation.

It further addresses the issue of residency for tax purposes. This is established by an examination of the facts. Whilst the CRA, for example, has a long form with lots of questions to enable them to determine the facts (and they tend to err in interpreting the facts in their favour) your residency for tax purposes is still determined on the facts as set out in the tax treaty and not national legislation.