Yes. Friends or relatives who lent each other money would need to create some sort of a paper trail, even if only an agreement / contract that they themselves wrote, signed and dated.

Interest free of course..... family

This is suprisingly intereresting I have a morgage in Scotland with the (out) in laws living in it. They only pay insurance, I pay the morgage would I be better to pay it off and aviod tax as I am not making anything on it?

This is from IT120R6 paragraph 6:

For a property to be a taxpayer's principal residence for a particular year, he or she must designate it as such for the year and no other property may have been so designated by the taxpayer for the year. Furthermore, no other property may have been designated as the principal residence of any member of the taxpayer's family unit for the year. For purposes of the latter rule, which applies if the taxpayer is designating a property as his or her principal residence for 1982 or a subsequent year, the taxpayer's family unit for the year includes, in addition to the taxpayer, the following persons (if any):

* the taxpayer's spouse or common-law partner throughout the year, unless the spouse or common-law partner was throughout the year living apart from, and was separated under a judicial separation or written separation agreement from, the taxpayer;

I think you are right that at one time each spouse could have different principal residences, but not now.

Then there are no tax consequences.

There is no absolute requirement for a loan between family members to be documented for tax or other purposes. As Judy points out, it is highly desirable to do so for many reasons. One such reason is that, if the loan is interest free, it will be very helpful to demonstrate to the CRA that the repayments are not taxable.

However, if you are asking (and by the use of the quotation marks I suspect you are) whether the lack of any paperwork would enable you to hide taxable income from the CRA then the answer is that this is both illegal and immoral, and could have serious consequences on your ability to stay in this country.

Sorry, I don't understand your question. I'm not being obtuse. I honestly don't understand the issue(s) you've raised.

Once you moved to Canada and became a tax resident of Canada, your property in Scotland would attract tax only if:

(1) you earned income from the property, e.g., by renting it for an amount that exceded the costs you incurred with respect to the property

or

(2) you sold it and the price you realized for it was greater than the value of the property at the time that you became a tax resident of Canada

Have you read the Wiki on Tax and House Sales? It explains the implications both in the UK and Canada.

I don't know if army pensions are like regular British government pensions. The latter continue if you have them paid to you in Canada, but they no longer are linked to inflation if you choose that option.

You can choose to get your army pension paid into a British bank account even after you've moved to Canada. If army pensions are the same as other pensions in this regard, your pension payments will be increased over time in response to inflation. You could then arrange to transfer money from your British bank account to your Canadian bank account when you needed it.

The one thing you can't foretell, and it's a limitation regardless of the way in which you choose to receive your pension, is that the exchange rate between the British pound and the Canadian dollar will fluctuate in the future.

From a taxation point of view, there really is no difference whether you get the pension paid into a UK bank account or a Canadian bank account. When you become a tax resident of Canada, you're liable for tax on your worldwide income. However, because of tax treaties, you receive a credit for tax that you've paid in the UK. These treaties have been designed to avoid double taxation.

Oh, here is an excellent discussion thread entitled Military Pensions. Very good info there.

I am not sure what you mean.

Do you live in Canada or the UK?

Do you own a house in Scotland, that you pay the mortgage on this house, but you let relatives stay there effectively free of charge?


See post #19 on this thread. Also post # 5 on the thread on Military Pensions that Judy linked to above.

Sorry, just being facetious, seemed to be what was being implied so had a bit of fun with the obvious next question.

As I am coming via a business route, I doubt my solicitor would let me do anything like that even if i wanted to.

All a tax inspector would have to do is ask for proof of where you loaned the money in the first place. I bet "I won £10,000 cash on the horses and loaned it to my mum the next day in cash" would go down well.

'sOK. I have been known to get on my high horse about this.

I currently live in Germany with the army (so pay british taxes) I plan to move to Canada late next year. I have a house in Scotland and I pay the morgage on it. The inlaws reside in the property and only pay house insurance (so basically free) I have the cash to splash and could pay off the house, but I would rather keep the cash and use it when I move to Canada, morgage etc and allow my pension to pay thr UK morgage

Judy
Thank you for the thread as always I jump in instead of looking and reading in detail first. Thank you and everyone else for guidance and help

I read all of this thread with interest, but would appreciate some advice, because when it comes to tax etc, unfortunately the words immediately blur into "foreign"!! (Of course, if it was the flavours of wine I would remember every sylabble lol)

So our situation:
We are moving to Canada permanently in the summer, we have our COFR. We have bought our house in NS outright, and will sell our house here so that we can have a couple of years off before re-commencing work after doing up said Canadian house. So far, so simple, I think.

But hubbly has a house (no mortgage) that he lived in before he married me, in the days when you could get a house for £30k. It is now worth about £100k. his mum recently divorced, so she will be living in it "free" until she dies, she is only in her 60s mind. This will give us the safety net of a house to possibly return to in the future if the absolute worst happens and in a few years we think we've made a mistake, or a nice pension income for us to sell the house after she has "finished" with it.

Would we have to pay Canadian tax on selling this house, and if so roughly what percentage, in today's terms, would it be? I think from the above that we would, but I don't know if I got the wrong end of the tax stick?

Thanks in advance for any help!!
Rachel

well done with the pensions link judy. cheers

There are no tax implications at the moment. If, at some point in the future, you rent this house you will need to declare ownership of the property on your Canadian tax return and pay Canadian income tax on any rental profit you make. Up till then it will be classified as personal use property.

However, if you sell it in the future you will be liable for Canadian tax on any capital gain. For Canadian tax purposes the capital gain is counted from the day you land in Canada in the summer. You will do yourself a big favour if you can get an appraisal of the property before you emigrate. The capital gain will be calculated thus:

(Sale price - estate agents and lawyers fees) @ exchange rate on the date of sale

minus

Fair market value on the date you move to Canada @ the exchange rate on that day.

Only one half of the capital gain is taxable. This will be at whatever is the marginal rate of tax your OH pays in that year. Therefore you can plan a bit e.g. take a sabbatical in that year to ensure low earnings - or load up your RRSP that year.

There is scope for even more tax planning but you need the advice of a lawyer in the UK, and you need to trust your MIL. Can your OH give the property to his mother? My knowledge of UK tax law is out of date, but the way it used to work is that after 7 years this becomes a tax free transfer. Then your MIL wills the house back to your OH on her death. In this case, the house was her principle residence so there is no tax for anyone to pay in Canada. (But you MUST run this by a lawyer/accountant in the UK first).