Working remotely for a UK-based company
 

Hi everyone,

I've recently received my LOI for the IEC program, and I will be moving to Toronto in 7 weeks time. My current UK-based employer has agreed to employ me to work remotely from Canada. I think it is fantastic as I'll have a job the moment I get there, I can work wherever I want, and I manage my own schedule/time.

Anyways, I would you like to know if there is anything I should be aware of in regards to tax etc. My employer is purely UK-based, but we are not sure of what tax I should be paying, or how I should be paid my salary etc.

We've only just started talking about this today, however I thought I'd ask here in case anyone has any guidance or information to contribute.

Thank you in advance,
Simon

Re: Working remotely for a UK-based company
 

Souvenir has worked that way for years, try sending him a Private Message.

Re: Working remotely for a UK-based company
 

In his current guise, he goes under the name "Souvy" in case you can't find him on the members list.

Re: Working remotely for a UK-based company
 

Oh yes, "Expatpat", I thought, knowing that was no longer the nom du jour. I wish he'd move on to "Stevens" and have done with it.

Re: Working remotely for a UK-based company
 

I expect he'll move on to "Stevens" shortly after you finally embrace "Harry H Corbett".;)

Re: Working remotely for a UK-based company
 

Unless they have an office in Canada or are willing to set up a Canadian payroll (either way, Canadian business number), the only way to do it is to be self-employed or start a corporation and do all the payroll yourself. And presumably if they did it they'd have to qualify to hire someone who was in the IEC. Starting a corporation requires you to be a tax resident of Canada to use a CCPC, but you're better off being self-employed from your description, I'm not sure though if people on the IEC can legally be self-employed (or start a a corporation that is essentially self-employment), you'd have to check with CIC. Kind of defeats the purpose of getting international experience though if you could, I would have thought.

Not a word.

Unless they're willing to do a ton of paperwork for one person, basically the principle is you set up your own business and invoice them. Requires you to have a business number, so that you can do payroll and HST. Business services to an overseas company are considered a zero-rated export.

http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-11e.pdf - and various other publications. You should understand what a business number is and also read the GST/HST guide.

Re: Working remotely for a UK-based company
 

Why would he need to go to all that trouble when he is only on a 1 year WHV?

Couldn't his salary just be paid, per normal, into his UK Bank account and then he could withdraw funds as necessary - or transfer funds - and leave it at that?

Presumably if he is still in Canada at the end of the year he would have to do a tax return stating 'worldwide income' but with the tax treaty in place it's unlikely that he would have a tax liability in Canada.

:unsure:

Re: Working remotely for a UK-based company
 

Because he's earning the money while physically in Canada, so the salary is Canadian source and must have Canadian payroll/income taxes paid on it.

There are some limited exemptions for people being transferred between offices and so on but none of them apply here and it doesn't as sound as though the UK employer would go to all that trouble for one person. And he would have to be on an intracompany transfer visa, which he's not.

Re: Working remotely for a UK-based company
 

I do this. If you need any information regarding payroll providers who can work with UK companies let me know.

Re: Working remotely for a UK-based company
 

Thank you both, I will send Souvy a private message.


The IEC website specifies that the IEC work permit is "valid for any type of job", so being self-employed may be viable, and probably the best option.

Yes, I am aware it's not a real word. Sorry for writing it here!

I just checked the IEC website and it states that most IEC participants are considered "non-residents" and hence not required to pay tax. However a participant may file taxes if they reside in Canada for six months or more during a tax year - subject to any tax treaties.

I'm intending to apply for a 2nd year on the IEC, so I think I will most likely submit taxes.

Re: Working remotely for a UK-based company
 

So people can't use slang or colloquialisms?

In fact, it is a word in North American English. You can check here:

http://oxforddictionaries.com/defini...ways?q=anyways

http://dictionary.reference.com/browse/anyways

It's also a valid Scrabble word:

http://www.scrabblefinder.com/word/anyways/

Re: Working remotely for a UK-based company
 

Pah! You put that on my board and I'd jiggle my rack at you. Sibilance is a disability, not an excusable variant of English.

Re: Working remotely for a UK-based company
 

I am not so sure about that.

By custom and practice most holders of working holiday visas are taxed as factual residents for the time they are in Canada.

You are a factual tax resident if you establish sufficient residential ties to Canada. The number of months is not an issue. This is the common law definition. A factual resident pays tax in Canada on their worldwide income for the time they are in Canada.

If you do not establish sufficient residential ties to Canada, but nonetheless spend more than six months in Canada, you may be deemed to be tax-resident here. This is a statutory provision and should not be confused with the fact based common law approach. A deemed resident pays tax in Canada on their worldwide income for the whole of the year they are a deemed resident.

If you do not establish sufficient residential ties residential ties and stay less than six months you are taxed as a non-resident. A non-resident pays tax in Canada on Canadian sourced income but they are not entitled to a personal allowance.

Under the UK/Canada tax treaty you cannot be tax-resident in both countries at once. There are tie-breaker rules to apply when reside is uncertain. However, working holiday visas are intended for young people who generally will not have much in the way of overseas income or assets so the convention of taxing them as factual residents makes life easier for everyone.

Re: Working remotely for a UK-based company
 

Hi JonboyE,

Thank you for your response.

I just re-read the guide on the IEC website, and I think you are correct in that I would have to file a Canadian tax return either as a "resident" or a "non-resident". I misread the guide, and incorrectly thought it meant non-residents didn't need to file taxes in Canada. :o

I'm thinking that the easiest approach may be for my employer to pay me as a contractor, and I file my taxes in Canada as a resident. However, I still want to investigate what other options we have.

Re: Working remotely for a UK-based company
 

Or Nosferatu.

Re: Working remotely for a UK-based company
 

Not sure my position is quite the same as yours but, as Nosferatu pointed out earlier, I've been doing something similar for several years. Here goes, hope some of it is useful.

I came here as a permanent resident in 2000. I did SFA for 2 years, by which time I was firmly established as resident in Canada and non-resident/non-domiciled in the UK.

In 2002, I started doing contract work for a UK company (home office-based). I did engage an accountant at this stage because there were some peculiarities specific to me. I was told to just report to the Canadian taxman as a self-employed person and stick my income into my annual personal tax return. There was no point in incorporating because I'd have to register for GST (silly because my work counted as an export and didn't involve GST). I was also able to claim stuff against tax (utility costs etc) because I was working from home.

There is a slight issue here in that tax returns are not due until well into the New Year but the tax year is calendar and if you haven't paid the tax you owe by then you get penalised. I'm not too sure about this bit. Our resident accountant can probably advise.

My first accountant warned me that I would at some point be asked to pay my taxes in instalments. This is what I do now. My taxes for this year are based on my last tax return and are due quarterly.

In 2005, the UK company made a permanent salaried employee. This changed things a bit. The UK taxman is not interested in me (we checked) and there are no UK deductions or payslips. I get laid gross by electronic transfer to my Canadian account, with my employer picking up all the charges.

It would be a good idea to build-in a contractual mechanism for addressing fluctuations in the exchange rate. I didn't even think of it and I have lost a bundle as a result.

The Canadian taxman did at one point insist that my employer handle my Canadian deductions and remit the money. That idea was argued against by my accountant and never came to pass.

When I became an employee I lost many of the tax breaks. I still get some, as a remote employee required to work away from the office and pick up some costs (essentially utility bills and cellphone). There is a form to fill in (T2200 E). It doesn't have to be included with your return but you may be required to show it, if they ask for it. They've never asked me.

Last year Revenue Canada got the idea that I was running a business and asked me to register for GST. That got sorted with a quick letter from my boss. End of story.

There are a whole bunch of questions to ask.

Residency is probably the key one. If you are resident in Canada for tax purposes, you'll have to pay tax in Canada, or show that you have paid it in the UK. You're only planning on coming for a while. Maybe it would be better to stay as a UK employee get paid in a UK account and simply not tell the Canadian taxman anything at all (probably illegal but probably also do-able).

Re: Working remotely for a UK-based company
 

Which says it all. Last I checked he wasn't from North America anyway.

Re: Working remotely for a UK-based company
 

Two points - if your sales are over $30,000 you have to be GST/HST registered regardless of incorporation. There are serious benefits to be registered in the situation described, because exports are zero-rated, so you can claim all your ITCs back.

Second, if you have a home office, technically it can become subject to capital gains tax because it's no longer part of your home. If you rent this isn't an issue. I've had this discussion with the CRA on various occasions and I keep getting different answers, but I think that is the situation.

Which is why I invoice my overseas clients in Canadian dollars. You agree the contract in Canadian dollars first, of course.

Re: Working remotely for a UK-based company
 

I agree and the subject has come up on here before and it's clear the CRA consider them resident for tax purposes.

If you are actually only going to be in Canada for a year it can make sense to try and argue you are non-resident, but really as you say there is little advantage because either way you are paying taxes on your Canadian-source income and younger people generally don't have much income from other sources anyway.

If you phone up the CRA they'll just spit out an NR-74 and you can spend all day filling that in.

It would depend on your individual circumstances really, as many tax issues do.

But being non-resident has no bearing on the OP having to do payroll or anything like that, it's just how the T1 is filled in the following year. And any UK tax paperwork.

Re: Working remotely for a UK-based company
 

Thank you for the information, Souvy and Steve_ :)

Currently my employer is investigating the possiblity of using a payroll provider, thanks to a suggestion from London Mike.

Re: Working remotely for a UK-based company
 

Good luck! :fingerscrossed: