Hi,

My partner was offered a lump sum as part of his relocation package, but actually he has only received around 50% of it, the rest has gone to the taxman.
This relocation package has to be paid back to the company in case he doesn't work for them for at least 2 years.

In case he does not complete these 2 years, does he have to pay back the total of the lump sum to the company and then claim the taxes he paid to the tax office??
or does he have to pay back to the company only the money that he received? ?

I've asked in the tax office and the reply was: "I dont know what you're talking about"

Thanks

You should check the terms and conditions of the agreement (s)he signed, but in all likelihood this is what will happen.

Thanks JonBoyE

It is not that he is planning to leave his job (we've just arrived), but it is good to know it just in case.
Taxman has taken 55% of the relocation package...grrrrr...

That sounds pretty unusual so it must be something they have defined in their contract and it sounds like it would be full amount. How tight.

By the way you will get some of that tax back at tax return time. You seem to get taxed a bit higher as an out of band lump payment, at least I was and got back.

It seems like a lot, not sure if they have done it right cause the sum wasn't very high. We' ll see if we can get some of it back.

im not a tax expert but isn't this classed as business expense?..therefore subject to different tax rules..it should not be classed as income?

Presumably any discrepancy will end up coming out in the wash when the tax return is completed in the Spring.


Welcome to Canada eh...

It depends on how the company defines the relocation package. In most cases it is taxable (unless reimbursed against receipts). I know it cuz I've recently gone through it and had to pay a shed load of tax on my relocation allowances.

Not unless you are a business.

If you get money from your employer, other than for reimbursement of expenses you have incurred, it is income.

If you are an employee it is taxable unless you are living in Canada and move to be closer to work (within some conditions), then the income is taxable and the moving costs deductible.

What if payment is made while still resident in the UK and the receiver is an employee who doesn't file self assessment?

isn't relocation an expense that you have incurred?

It is if you have paid for the expenses and claim then the costs through receipts. But its not if you take money from your employer and then spend it as you wish. In that case its income.

Lots of things are expenses, whether they are deductible expenses depends on the CRA rules.

For the CRA rules to apply you have to already be a resident of Canada when you move, not moving to become one. If you receive the payment after becoming a tax resident in Canada, then it is taxable income.

http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/t1-m-11e.pdf

If you meet the rules and can deduct expenses (with receipts) this can be claimed on the tax return and any money received from the employer reported as income. You cannot claim anything you paid prior to becoming a tax resident as it does not apply. If one balanaces the other out, you pay nothing, if their is a difference, you may pay more tax or get some pack from other income.

If you receive the money whilst a tax resident elsewhere, their tax rules would apply and it could still become taxable income. What is better is if the company pays the actual bills direct to the moving companies, airlines and hotels. This may still be considered benefit in kind, but it may pass muster with CRA.

^^^^
Anybody

The Feds will burst down their door at about 2am, arrest them for tax evasion, and sell all their possessions to clear the penalties, before deporting them.

Sleep tight.