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Tax newcomer 2019 (with ongoing UK income)

Tax newcomer 2019 (with ongoing UK income)

Old Feb 26th 2020, 4:52 pm
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Default Tax newcomer 2019 (with ongoing UK income)

Hi. I'm an irregular visitor to the forum but gratefully benefited from folks' advice in the past. Apologies for submitting what to some might be a re-occurring thread theme, but having looked, no other thread question/advice quite aligned with my situation.

Prior to moving to Canada as PR in Aug 2019, I worked full-time in the UK so paid regular UK income tax in the current tax year 2019/20. We have some interest from savings but the interest gained is below the Personal Savings Allowance (PSA) threshold at which UK tax would have to be paid. We have rented out our UK home, managed through an agency with the monthly rent paid to us gross as we obtained a non-resident landlord registration with HMRC. I'm working full-time here in Canada and have obtained my T4.

My dilemma is:
Should I first submit my UK tax return to HMRC after 5 Apr 2020 but before 30 Apr and then submit confirmation of any UK tax paid to the CRA on my Canadian tax return by 30 Apr? Or should I submit the Canadian tax return first and the HMRC tax return afterwards? Essentially, which comes first the chicken or the egg?

Other more generic questions are:
  1. As the CRA lays claim to any worldwide income, how do I subsequently demonstrate to HMRC that I've already paid Canadian tax on my UK rental income to avoid being taxed twice? This is linked to the dilemma above.
  2. And how should I treat my UK savings interest? In Canada they'll want a slice of the income gained, but the HMRC wouldn't demand anything because it falls below the PSA threshold?
I've read the current CRA 'Newcomers to Canada 2019' pamphlet T5055(E) Rev 2019 but it doesn't go into enough detail.

Advice or guidance by those who've navigated the complexities of transitioning from one tax system to another will be gratefully received.
Thanks!
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Old Feb 26th 2020, 5:08 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Make sure you declalre any assets overseas that have a cumulative value of $100,000 or more as well (which would include your property to rent out - and any investments / savings) - failure to do so will incur huge penalties.

Have you had a read over our fabulous wiki section on Taxes in Canada? You should find it of use.. https://britishexpats.com/wiki/Category:Taxes-Canada
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Old Feb 26th 2020, 5:24 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Any tax owed to Canada will need to be paid by April 30, 2020. If you are "self-employed" you have until the middle of June to file your taxes. If you are not self-employed, you have to file by April 30, 2020. Penalties/interest may apply if you miss any of these deadlines.

I suggest that you review your status and file at a time that suits you best in Canada. You can file an addendum at a later date if the UK tax has a bearing on your Canadian tax liability. The allowance in the UK on interest income is only relevant in the UK. All income needs to be declared in Canada. For example, I receive two military pensions from the UK, both of which are tax free in the UK. Canada takes its share of them.
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Old Feb 26th 2020, 5:28 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

I don't know the answer to your tax timing question given you have UK tax to pay / claim back in this first year.

I do them in order. I submit to CRA around now, then do HMRC SA. Hadn't thought of doing it the other way round.

My UK rental income after taking fees and interest into account (interest relief is ending, mind) falls below the UK personal allowance threshold. But I pay tax on it in Canada at my marginal rate. So only paying in one jurisdiction.

You're gonna pay the same amount of tax whichever way you do it, but hopefully an accountant will be along to detail best strategy in your case.

Are you due a refund in the UK, given that you were presumably on PAYE? In that case I'd do UK first, get a final figure for what you've paid. Then declare this to CRA. Otherwise you'd be declaring to CRA the overpayment of tax paid to HMRC, and it'll roll on for another year. So this time next year you'll be trying to straighten it out still, having since received a refund from HMRC.

Sorry probably haven't helped
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Old Feb 26th 2020, 7:00 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Originally Posted by Siouxie View Post
Have you had a read over our fabulous wiki section on Taxes in Canada?
Siouxie - I find the various tax pages a bit jumbled personally, especially for people in the process of switching from the UK to Canada. I have taken the liberty of adding a few new entries to what I think is the most appropriate wiki page, which is the one here: https://britishexpats.com/wiki/Taxes...gration-Canada.

I have also put a link to it from the Canadian Immigration index page.

I would be happy to add additional entries or sections if someone can provide the wisdom / wording. I am thinking especially of the thorny one about taxes on rental income from a property left in the UK......
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Old Feb 26th 2020, 9:08 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Originally Posted by Hurlabrick View Post
Siouxie - I find the various tax pages a bit jumbled personally, especially for people in the process of switching from the UK to Canada. I have taken the liberty of adding a few new entries to what I think is the most appropriate wiki page, which is the one here: https://britishexpats.com/wiki/Taxes...gration-Canada.

I have also put a link to it from the Canadian Immigration index page.

I would be happy to add additional entries or sections if someone can provide the wisdom / wording. I am thinking especially of the thorny one about taxes on rental income from a property left in the UK......

Thanks, you've posted some helpful info for when people are immigrating - the wiki tax section is for all aspects of taxation in Canada. You might want to mention about 'deemed disposition' on the 'immigration' taxation page.
https://www.canada.ca/en/revenue-age...rs-canada.html


That isn't necessarily quite right.. you may have to pay some taxes on any capital assets as well as any worldwide income, depending on the value - for example if you own assets (cumulative value) of $100,000 or more then you may have a tax liability if your assets gained in value or you received bonus's etc., (for example shares or investment portfolio) and must report it annually on form T1135 . Failure to do so results in major penalties.
https://www.canada.ca/en/revenue-age...-t1135.html#h3
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Old Feb 28th 2020, 8:31 pm
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Hi All,

Thanks for all your comments and feedback to my question(s). Also, on reflection I decided to get some professional tax accountancy advice; so spoke to a UK tax accountant (based in the UK).

Having to pay tax on the UK rental income is clear - the question is whether you pay UK tax first and this declare to CRA or CRA tax first and then declare to HMRC? The UK accountant says that HMRC has first dibs on levying tax on the UK rental income element as it occurred on a property in the UK - which makes sense. I then need to declare any UK tax paid to CRA and they subsequently take their residual slice.

In the transitional year of moving to Canada; I left my UK job just 5 months into the 2019/20 UK tax year; so I still have 7/12th of my UK 2019/20 personal tax allowance left to use. Fortunately, with the rental income split 50:50 with my wife, minus some deductions for property maintenance, my remaining 2019/20 UK personal tax allowance should cover any tax liability I individually may have.

Also as @Almost Canadian and @Will_PA pointed out, the CRA will therefore apply tax to the whole rental income. I just need to make sure I get an accurate view on what my final UK tax position is for 2019/20 as soon as possible after 5 April and before 30 April so it can be reflected in my CRA 2019 tax return and prevent a legacy issue from rolling on another 12-months.

Thanks again for your comments.
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Old Feb 29th 2020, 12:34 am
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Originally Posted by migxpat View Post
Hi All,

Thanks for all your comments and feedback to my question(s). Also, on reflection I decided to get some professional tax accountancy advice; so spoke to a UK tax accountant (based in the UK).

Having to pay tax on the UK rental income is clear - the question is whether you pay UK tax first and this declare to CRA or CRA tax first and then declare to HMRC? The UK accountant says that HMRC has first dibs on levying tax on the UK rental income element as it occurred on a property in the UK - which makes sense. I then need to declare any UK tax paid to CRA and they subsequently take their residual slice.

In the transitional year of moving to Canada; I left my UK job just 5 months into the 2019/20 UK tax year; so I still have 7/12th of my UK 2019/20 personal tax allowance left to use. Fortunately, with the rental income split 50:50 with my wife, minus some deductions for property maintenance, my remaining 2019/20 UK personal tax allowance should cover any tax liability I individually may have.

Also as @Almost Canadian and @Will_PA pointed out, the CRA will therefore apply tax to the whole rental income. I just need to make sure I get an accurate view on what my final UK tax position is for 2019/20 as soon as possible after 5 April and before 30 April so it can be reflected in my CRA 2019 tax return and prevent a legacy issue from rolling on another 12-months.

Thanks again for your comments.
Could I suggest you get a Canadian Tax accountant - the UK one will know nothing of the laws of Canada for tax purposes. There are a few around that know about UK taxes - some are from the UK and practice here too. I'm sure people could recommend one to you if you would like them to.

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Old Feb 29th 2020, 1:41 am
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Default Re: Tax newcomer 2019 (with ongoing UK income)

Originally Posted by Siouxie View Post
Could I suggest you get a Canadian Tax accountant - the UK one will know nothing of the laws of Canada for tax purposes. There are a few around that know about UK taxes - some are from the UK and practice here too. I'm sure people could recommend one to you if you would like them to.
Hi Siouxie,
Great advice and something I've already acted upon. In my last post I forgot to say I was doing just that and have an appointment tomorrow with a Canadian tax accountant in the Markham area. I'm not sure of his experience in dealing with UK newcomers, but he came highly recommended and has >40yrs experience under his belt apparently.
Thanks.
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