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Tax Concerns Moving from UK to Canada

Tax Concerns Moving from UK to Canada

Old Jul 29th 2021, 1:53 am
  #1  
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Default Tax Concerns Moving from UK to Canada

Hi folks,

I'm new here and apologies if this question has already been mentioned in a thread but I was unable to find it.

My background:
- I've been working and living in the UK for 7+ years and the employer is a UK-based company.
- I'm holding a British passport and the PR visa for Canada as well.
- Due to personal reasons, I have to move to Canada next year permanently.
- However, the UK employer doesn't have any business entity in Canada to do internal transfer or relocate. But they still want me to work remotely for them even if I physically move to Canada.

Here comes the options I could probably choose from:
1) Live in Canada and work remotely for the UK company as a full-time employee;
2) Live in Canada and register a self-employed business in Canada and work remotely for the UK company as a remote contractor;
3) Register a self-employed business in the UK and then move to Canada, work remotely for the UK company as a remote contractor;

Are these options feasible/legal? Which could be a better option in terms of tax?

Thanks in advance!
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Old Jul 29th 2021, 3:27 am
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Default Re: Tax Concerns Moving from UK to Canada

Hello and welcome to BE!

Have you already completed your 'Landing Interview' (validated your COPR) and kept up with your residency requirements to retain your PR status in Canada? Do you have your PR card or will you need to apply for a Permanent Resident Travel Document (PRTD)?

In my opinion Option 2 is the best choice - become self employed in Canada, invoice the company in the UK monthly and work as a freelance remote contractor (there are a few members who have done this off and on for years). Perfectly legal.

The benefits to this are you don't pay UK tax or national insurance and you don't have to faff about getting certificates of taxes paid to offset against taxes potentially due in Canada. You are required to declare worldwide income in Canada.. so although there is a tax treaty between the UK and Canada, it saves a lot of paperwork back and forth.

As a self employed person in Canada you can offset many business use of home office expenses, a percentage of utilities etc., and capital cost items (such as a computer/computer desk) against your tax liabilities in Canada. You will need to register for HST once you earn over $30,000 but you charge 0% HST to overseas clients that you provide an online / remote service to (i.e. rather than a physical item you send them). You will have to pay Canada Pension Plan (CPP) contributions (similar to national insurance) but you receive 50% of the amount due as a tax credit.

There are a few threads on the subject of being self employed but no need to apologise at all - they aren't always easy to find! Click HERE for a bespoke British Expats search on Google for this topic

Our wiki may be of use to you too.. https://britishexpats.com/wiki/Category:Taxes-Canada

Exciting times!

Last edited by Siouxie; Jul 29th 2021 at 3:29 am.
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Old Jul 31st 2021, 12:00 pm
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Default Re: Tax Concerns Moving from UK to Canada

Option 2 definitely. In Ontario you can set up yourself with a numbered incorporated company for around $500 very quickly. It took me a day to organise online. Register for HST online as well , equivalent to VAT. Saves worrying about any UK tax issues. I provide services to a UK company remotely from Canada. DM me if you be require further help.

Last edited by glendem4; Jul 31st 2021 at 12:07 pm.
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Old Jul 31st 2021, 12:14 pm
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Default Re: Tax Concerns Moving from UK to Canada

Originally Posted by glendem4
Option 2 definitely. In Ontario you can set up yourself with a numbered incorporated company for around $500 very quickly. It took me a day to organise online. Register for HST online as well , equivalent to VAT. Saves worrying about any UK tax issues. I provide services to a UK company remotely from Canada. DM me if you be require further help.
Just to confirm that you do not have to register and incorporate a business to work as a self employed person in Ontario / Canada .. https://www.canada.ca/en/revenue-age...ietorship.html

A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest kind of business structure.

The owner of a sole proprietorship has sole responsibility for making decisions, receives all the profits, claims all losses, and does not have separate legal status from the business. If you are a sole proprietor, you also assume all the risks of the business. The risks extend even to your personal property and assets.

If you are a sole proprietor, you pay personal income tax on the net income generated by your business.

You may choose to register a business name or operate under your own name or both.
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Old Jul 31st 2021, 10:14 pm
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Default Re: Tax Concerns Moving from UK to Canada

Originally Posted by Siouxie
Just to confirm that you do not have to register and incorporate a business to work as a self employed person in Ontario / Canada .. https://www.canada.ca/en/revenue-age...ietorship.html
Sole proprietorship opens risks to personal property and assets. Safer route is incorporated with limited liability.
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Old Aug 1st 2021, 5:45 am
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Default Re: Tax Concerns Moving from UK to Canada

Originally Posted by glendem4
Sole proprietorship opens risks to personal property and assets. Safer route is incorporated with limited liability.
The risks depend on what type of business you perform and the likelihood of there being a claim against you. Self employed / sole proprietorship is far simpler unless you are likely to get sued.
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Old Aug 1st 2021, 8:42 am
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Default Re: Tax Concerns Moving from UK to Canada

Originally Posted by glendem4
Sole proprietorship opens risks to personal property and assets. Safer route is incorporated with limited liability.
I would not jump into incorporation, it is not a water tight guarantee of indemnity, in some circumstances, directors can be sued as well. There are reporting requirements and costs associated with operating a corporation that a proprietorship does not have. From a liability perspective, banks and creditors often ask for personal guarantees prior to granting credit. There most often is asset protection from liability, but this may not be 100%, especially if the company is not set up correctly or operated improperly. I got into a legal spat with a contractor, they sued us. We counter-claimed against them personally, they tried to claim corporate protection and lost. The judgement being against the individual, not the corporation. It resulted in a lien against their personal property until they paid up.

If possibly being sued is a concern, an industry that increases the risk, doctors, lawyers, realtors, food industry etc. it is worth getting professional advice. If a business exports goods to high risk countries, such as USA there may be a product liability risk. One can also take out insurance as a protection, although both incorporating and insurance are wise.
Incorporation can make tax planning sense for high income organisations and can make sense from a transition planning perspective. Corporate structure is complicated, share classes and other set up issues that require a professional. Getting it wrong can be very expensive.
For anyone considering incorporating it is advisable to seek professional advice to be sure it is right for the business and it is done correctly.
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