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Selling UK House - UK and Canada Tax implications

Selling UK House - UK and Canada Tax implications

Old Mar 25th 2021, 7:19 pm
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Default Selling UK House - UK and Canada Tax implications

Hi, I am wondering what the tax implications are in UK and Canada for selling UK house after living in Canada for nearly 3 years without having plans to return to the UK. Also can one actually get an estate agent and lawyer to sell the UK house whilst abroad.
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Old Mar 25th 2021, 7:52 pm
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Default Re: Selling UK House - UK and Canada Tax implications

You need to know what the house was worth when you became tax resident In Canada, perhaps the people selling it could value it retrospectively. When you have that number, converted to Canadian dollars at the rate on that day then house taxes are the same as if it was in Canada. You have a capital gain, or loss, of the difference in value between emigrating and selling, whether or not that is taxable largely depends on how many other houses you have. Estate agents and lawyers will act for you whether you are abroad, in jail, or dead.
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Old Mar 26th 2021, 12:06 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by db407 View Post
Hi, I am wondering what the tax implications are in UK and Canada for selling UK house after living in Canada for nearly 3 years without having plans to return to the UK. Also can one actually get an estate agent and lawyer to sell the UK house whilst abroad.
In addition to the above response, if the value of the property is over $100,000 you are required to report it on your tax return each year .. and any income that you may be getting from rent.

Our wiki has some good information on this and other tax implications on selling your house..

Look at the CRA information on 'deemed disposition' as well

https://britishexpats.com/wiki/Tax_a...e_UK_to_Canada
https://britishexpats.com/wiki/Taxes..._assets_to_CRA
https://britishexpats.com/wiki/Tax_o...me_from_Canada
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Old Mar 26th 2021, 12:11 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Thanks for your responses.
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Old Mar 29th 2021, 7:14 pm
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Default Re: Selling UK House - UK and Canada Tax implications

I have a similar situation and have a follow-up question. I have been renting in Canada the whole time we have been here. Could I deem my UK property to be my principal residence (it's the only property I own) making it exempt from Canadian tax?
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Old Mar 29th 2021, 8:34 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
I have a similar situation and have a follow-up question. I have been renting in Canada the whole time we have been here. Could I deem my UK property to be my principal residence (it's the only property I own) making it exempt from Canadian tax?
Yes to principal residence. As above, capital gain/loss based on shift in value since being tax resident in Canada. Typically there won't be a taxable capital gain.
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Old Mar 29th 2021, 8:53 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Thank you for your reply. It's really useful to know that I can deem my UK property to be my principal residence because I do not own any Canadian property.
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Old Mar 29th 2021, 8:55 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
Thank you for your reply. It's really useful to know that I can deem my UK property to be my principal residence because I do not own any Canadian property.
You will still be liable for taxes on any increase in value from the date of deemed disposition until the date the money is received in Canada on sale.
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Old Mar 29th 2021, 9:00 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by Siouxie View Post
You will still be liable for taxes on any increase in value from the date of deemed disposition until the date the money is received in Canada on sale.
Thanks. Is the "date of deemed disposition" the date the sale is completed or the date I landed to live in Canada permanently?
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Old Mar 29th 2021, 9:07 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
Thanks. Is the "date of deemed disposition" the date the sale is completed or the date I landed to live in Canada permanently?
The date you become resident for tax purposes

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

Property you owned before you arrived in Canada

If you owned certain properties (other than taxable Canadian properties) at the time you immigrated to Canada, the CRA considers you to have sold the properties and to have immediately reacquired them at a cost equal to their fair market value (FMV) on the date you became a resident of Canada. This is a deemed disposition.

https://britishexpats.com/wiki/Capit...m_UK_to_Canada
https://britishexpats.com/wiki/Tax_a...e_Sales-Canada
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Old Mar 29th 2021, 9:14 pm
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Default Re: Selling UK House - UK and Canada Tax implications

The gain is taxable even if the property was my designated principal residence?
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Old Mar 30th 2021, 12:16 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
The gain is taxable even if the property was my designated principal residence?
If you are residing in Canada, yes... IN Canada
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Old Mar 30th 2021, 12:34 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by Siouxie View Post
If you are residing in Canada, yes... IN Canada

As I read the regulations, there's no tax in Canada because it's the principal residence:

https://www.canada.ca/content/dam/cr.../t4037-20e.pdf

If it were not the principal residence, the capital gain would be the amount of the increase in value since the taxpayer moved to Canada. Half of that is taxable. It might then fall under the lifetime single use capital gains exemption (that was $400,000 when I wanted to use it).

I think that, in the typical case, where the taxpayer only ever owned one house at a time and sold the house within a few years of moving to Canada, it is unlikely that Canadian CGT would be payable.

Last edited by dbd33; Mar 30th 2021 at 12:39 am.
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Old Mar 30th 2021, 2:35 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by dbd33 View Post
As I read the regulations, there's no tax in Canada because it's the principal residence:

https://www.canada.ca/content/dam/cr.../t4037-20e.pdf

If it were not the principal residence, the capital gain would be the amount of the increase in value since the taxpayer moved to Canada. Half of that is taxable. It might then fall under the lifetime single use capital gains exemption (that was $400,000 when I wanted to use it).

I think that, in the typical case, where the taxpayer only ever owned one house at a time and sold the house within a few years of moving to Canada, it is unlikely that Canadian CGT would be payable.
Don't forget 'Deemed Disposition' rules... you are deemed to have disposed of (considered to have sold) the property on the date you become resident for tax purposes in Canada.. which is what this refers to:

when you are considered to have sold it, usually you do not have to pay tax on any gain from the sale because of the principal residence exemption
so you don't pay CGT on the date of deemed disposition - but any increase after that date i.e. when it's physically sold is liable for CG taxes, as I understand it.

The calculation of the principal residence exemption is limited to the number of tax years ending after the acquisition of the property during which the taxpayer was resident in Canada and the property is the taxpayer’s principal residence. If you sold your principal residence after October 2, 2016, and were not a resident of Canada throughout the year in which you acquired it, different rules apply to this calculation.

(and)

You can designate your home as your principal residence for all the years that you own and use it as your principal residence
*the 'and use it' as your principal residence is an essential part, I believe... and you can't have been using it if you are living in Canada, so how can you claim it as your principal residence? Additionally, there are different rules that apply if the property has been rented out.. see pages 44 and 45 of the pdf you referred to.

Regardless, I believe you are correct in thinking that the CG shouldn't be too high if the property has been sold within a couple of years of having it valued before leaving the UK (for Deemed Disposition reasons) - the problem could arise if somebody hadn't and couldn't find a friendly agent to give a retroactive valuation.

see also: https://britishexpats.com/wiki/Tax_a...a#Canadian_Tax

Last edited by Siouxie; Mar 30th 2021 at 2:49 pm.
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Old Mar 30th 2021, 4:22 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Thank you for your replies. I have a valuation from the time that we left, so that is covered. I will consult an accountant to figure out what my chances are of claiming principal residence. I know there is some grey area on this - there may be circumstances where you can claim principal residence even if we didn't live there. My mother did live there, but I don't think that is a relative that counts for principal residence purpose. Your replies have been very helpful. Thank you.
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