eastlands

Do you need to declare income that is earned in the UK & tax paid onit in the UK,(occ pension,isa,house rental).All this income is declared & tax paid via our accountant in the UK.Should i bother with all the above on a canadian tax return.Many thanks.

Aviator

You have to report your world income to CRA, you can claim a foreign tax credit for tax paid in the UK. You also have to report most foreign assets valued over $100,000 CDN. You may be better to also get an accountant in Canada to make sure you don't miss anything.

If you fail to report it will come back to haunt you in the future (and could be costly).

JonboyE

For example, $25.00 a day (up to $2,500.00) for failing to file a T1135 with your Canadian tax return.

By the way, if you are resident in Canada you shouldn't pay tax in the UK on an occupational pension. It is only taxable in Canada. The income on your ISA is tax free in the UK (unfortunately it is taxable in Canada). Most people do not pay tax in the UK on renting their house if they join the non resident landlord scheme (depends on the circumstances). You might need a chat with your UK accountant.

thefinneys

Hi

We are in a similiar sitation but we don't have an accountant in the UK. We we are renting our house out and we did sign up for the landlords scheme so don't pay any tax on the income. Should we declare the rental income or do we declare the profit after paying any house expenses such as mortgage, agent fees etc.. Is this likely to have a big impact on our tax return here?

Thanks
Melanie

JonboyE

You pay tax on the profit after mortgage interest, agent's fees, repairs and maintenance, and insurance etc. There is a form T776 that you must complete and file with your tax return.

The amount of tax you will have to pay depends on all your other circumstances.

jimf

If you join the non resident landlord scheme you receive the rent without the tax deducted but pressumably you still declare the rent as income in your Canadian and UK tax returns? In terms of timing of the tax returns is it always the case that the rental income will be declared in Canada first so even if the UK tax return showed tax to be paid the Canadian tax already paid would offset this?

JonboyE

Yes.

You only need to complete a UK tax return if:

a) they ask you to, or
b) you owe tax in the UK (in other words, the profit you earn is more than your personal allowance for the year).

Note that the foreign tax credit is on tax paid, not tax that will become payable.

If you started your rental on July 1, 2009 you declare the income from 01/07/09 to 31/12/09 on your 2009 Canadian tax return and pay any Canadian tax on this income. If required, you would file a UK tax return for the 2009/10 year and pay any tax due. If you did pay any UK tax for the period 01/07/09 to 05/04/10 you would file an adjustment request for your 2009 Canadian tax return once the UK tax is paid.

Edit: many people would not bother to submit an adjustment request for 2009 but just claim the credit for 2010.

jimf

Okay thats useful to know. Following the logic then it's enough to keep profit within the UK allowance to avoid UK tax but when Canadian slary is added to the return any profit at all will be subject to Canadian tax. In which case it makes sense to plan maintenance spending on the house up to the level which matches the income.

thefinneys

This is probably a stupid question but do I need to declare it even if I am not bringing it over to Canada. We are just letting the profit build up slowly into our UK account as an emergency fund!

I am very much up for being up front and declaring it but my OH is thinking that we shouldn't as it is such a small amount, we are probably talking about a $6,000 profit from it. Would they be able to find out if we didn't?

Thank you

JonboyE

Yes - you very definitely have to declare it.

Whether or no they will find out is irrelevant. Knowingly under declaring your income is fraud.

JonboyE

Just one proviso is that expenses have to be reasonable to be allowable. That said, it can be a good idea to arrange any repairs and maintenance so that they coincide with income.