dgagitw

I've not got there yet. Do you mean the new residence test or something else?

Souvy

That sort of thing, yes. I don't think the form can handle people like me (not resident or domiciled in the UK but an employee and director of a UK company).

Steve_

You're overthinking this - your CGT is calculated on your schedule 3, not your T1135. Yes I oversimplified by saying it is what it cost you (because I didn't pay enough attention to your previous post), in most cases that would be the case but you're talking about something you owned when you moved to Canada so it would be the FMV at that point.

At this point in time the FMV is just a guess - you cannot know for certain what the value is or was because you were in continuous ownership of it. The CRA is not expecting you (or maybe they are but I wouldn't worry about it) to get a formal valuation of your assets done. That only matters when you crystalize the gain, then you put that down accurately on your schedule 3.

This is a list of your assets and where they are so the CRA can be nosey and ask about them if they want to.

dgagitw

Yes, I did most of my UK return today and the only difference for me were the extra questions related to residency, everything else was the same as last year.

JonboyE

If you intend to be honest why is this a problem?

Re: post 43, that is just how the law works. The tax cost of any immigrant's asset is its fair market value on the day they become a tax resident, expressed in Canadian dollars at the exchange rate on that day. That is what goes on the T1135 and is also the basis of your capital gain calculation.

Think of it the other way around. If you had a huge gain on your property before you moved to Canada, and none after you moved, would you expect to pay capital gains tax to the Canadian Government on the increase in value whilst you lived in thh UK?

DougC

Hi JonboyE,

Thanks for pitching in to this thread - I've always valued your advice elsewhere on this forum.

Not sure I understand your logic here though (it's probably me being a bit slow!) but why should moving to any country reset your Capital Gains baseline to zero, especially when you haven't actually sold the asset in question & realised any of those gains? Any chance you could explain this again?

Also:

No, but I would expect to pay Capital Gains on any actual gain at the point I left the UK. No?

Thanks again,

DougC

Cepheus

This T1135 form is right pain in the backside!

When I came to Canada my home was worth £289k (we had it valued just before we left), now its worth £334k (just sold it). We made £600 a year from renting it we kept the income profit as low as possible in case of any taxation.

Is this correct?:

Maximum cost amount during the year: £334k

Cost amount at year end: £289k

Income (loss): £600

Gain on disposition: $0

Also can I expect a huge tax bill, would the UK tax you for selling your come and making some money on it?

Many thanks.

Steve_

Depends on when you left, the UK has recently decided to start applying CGT to the alienation of real property owned by non-residents. Before that it was only if you'd left in the last 5 years, is my understanding.

But you have to pay Canadian capital gains tax on it. In fact you may have to pay both and claim a foreign tax credit.

Cepheus

Thank you for your reply, any links to resources would be helpful.

The profit will be under $100k, does this matter?

I left in August 2012. I was told by my Tax accountant if we sold within the first 2 years we would be OK or after 5 years.

gryphea

That was true at the time, but no longer true.

Cepheus

Where can I find about all of this information. What is the case now, surely I can't be taxed if I make under $100k.

Steve_

You're taxed on any amount of capital gains unless it's exempt for some reason (which this isn't). It's not your primary residence. There's an exemption limit in the UK but it doesn't apply to non-residents and in any case it's immaterial in Canada. Also I'm not sure if the ACB resets by moving from the UK to Canada so the capital gain would be from the date you bought it, not the date you moved to Canada. Although you might be able to claim relief on the basis that it was your principle residence prior to that.

But anyway, assume the capital gain is £334,000 - £289,000 = £45,000 *1.85 (or whatever the rate was on the date of sale) = $83,250, so on your schedule 3 you divide that by 2 (as CGT is 50% of the income tax rate), and that is: $41,625, so you add that amount onto your income for the year. Bearing in mind you can deduct things from the ACB like real estate agent expenses.

Have a read of: http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-13e.pdf

JonboyE

For Canadian tax purposes you are deemed to have sold and repurchased the property on the day you became tax resident. Therefore you only pay tax in Canada on any gain since you moved here.

Cepheus

Technically the house has not sold just yet, we are still in the process. So I can either fill now or wait for it to be sold sold, which could take 2 more months.

Is my statement here: http://britishexpats.com/forum/showp...8&postcount=67

Correct? Thank you to all who have replied.

JonboyE

And a potentially expensive one this year.

But you are reporting it on your Canadian income tax return?

No. Your maximum cost is £289k x whatever the exchange rate was on the day you moved to Canada.

Yes, if you still owned it at December 31 then it will be the same.

Why would the gain be nil?

Your gain for Canadian tax purposes will be £344k x whatever the exchange rate was on the day you sold it (less closing costs) less £289k x whatever the exchange rate was on the day you moved to Canada. You add half of that to your taxable income for the year. 2014? That will be something around $50,000 so you will likely pay something between $10,000 and $20,000 depending on your marginal tax rate.

I don't have enough information to be sure but as long as the sale is completed before April 2015 you will probably be OK. Any UK tax you do have to pay can be deducted from the Canadian tax owing on the gain.