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Selling UK House - UK and Canada Tax implications

Selling UK House - UK and Canada Tax implications

Old Mar 30th 2021, 4:28 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.
Does the lifetime single use capital gains exemption apply to individuals? Or is it for small businesses only?
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Old Mar 30th 2021, 4:34 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
Does the lifetime single use capital gains exemption apply to individuals? Or is it for small businesses only?
The exemption is for individuals. Whether or not it applies to gains on houses I don't know but I think you can claim the house as your principal residence.
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Old Mar 30th 2021, 4:40 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.
Originally Posted by dbd33 View Post
The exemption is for individuals. Whether or not it applies to gains on houses I don't know but I think you can claim the house as your principal residence.
Thank you again. I live in Toronto, if there is an accountant/tax advisor that you can recommend, please send me a message.
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Old Mar 30th 2021, 7:07 pm
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
Thank you again. I live in Toronto, if there is an accountant/tax advisor that you can recommend, please send me a message.

My accountant dropped me! They have a policy of not dealing with clients where the fees are below a minimum, my work life simplified so I don't generate enough business any more. I can now say though that the CRA are way more helpful than one might expect. I'd phone them, from a burner phone, and ask about this.
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Old Mar 31st 2021, 1:20 am
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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?
Only if you sell within the first tax year of becoming a tax resident of Canada, after that any gain from deemed acquisition cost subject to CGT. The taxpayer cannot deem anything, it either is or isn't, not open to interpretation. Principal residence has nothing to do with owning or renting, it is where a person ordinarily inhabits, a rented house can be principal residence.

Last edited by Farmer on a bike; Mar 31st 2021 at 1:25 am.
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Old Mar 31st 2021, 1:23 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
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.
There is no grey area, the law is quite clear on this. To maintain principal residence while renting in another country, could only work if a spouse were inhabiting the house overseas. If no spouse and there were dependent children living in the house with a carer, this may also work.

Plenty of CPAs to choose from, for a larger firm with international experience, try MNP.
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Old Mar 31st 2021, 1:53 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by Farmer on a bike View Post
There is no grey area, the law is quite clear on this. To maintain principal residence while renting in another country, could only work if a spouse were inhabiting the house overseas. If no spouse and there were dependent children living in the house with a carer, this may also work.

Plenty of CPAs to choose from, for a larger firm with international experience, try MNP.
Thanks I will give MNP a call tomorrow. I want to know if there is any downside to attempting to claim the Principal Residence Exemption - if the worst they could do is deny the claim and then I pay the CGT, then it is maybe worth trying.
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Old Mar 31st 2021, 2:58 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by abaddon View Post
Thanks I will give MNP a call tomorrow. I want to know if there is any downside to attempting to claim the Principal Residence Exemption - if the worst they could do is deny the claim and then I pay the CGT, then it is maybe worth trying.
This is not the worse they can do. It can come back years later. Look up false statements+CRA Penalties can be a chunk of change and interest. Even an honest mistake can get expensive if found out. Audits can be random.
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Old Mar 31st 2021, 4:19 am
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Default Re: Selling UK House - UK and Canada Tax implications

Originally Posted by Farmer on a bike View Post
Only if you sell within the first tax year of becoming a tax resident of Canada, after that any gain from deemed acquisition cost subject to CGT. The taxpayer cannot deem anything, it either is or isn't, not open to interpretation. Principal residence has nothing to do with owning or renting, it is where a person ordinarily inhabits, a rented house can be principal residence.

Originally Posted by Farmer on a bike View Post
There is no grey area, the law is quite clear on this. To maintain principal residence while renting in another country, could only work if a spouse were inhabiting the house overseas. If no spouse and there were dependent children living in the house with a carer, this may also work.
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