Pension Tax Stuff
 

I have been led to believe that the reciprocal tax agreement between UK and Canada, as well as it being a disabled pension, meant that all was well with my police pension from Scotland. I have been checking into this and I am concerned that I have got this very wrong.
I was retired due to an injury on duty and immediately started receiving a 20yr police pension with additional injury payment. It is and has always been taxed at source. The injury component is either not taxed or is not taxed very much. I have lived in Alberta for 5 years now and as the money is paid into a long term savings account in Scotland and will be left there till I retire at 60. I have a very bad feeling that I should have been declaring this and paying tax on it.
All advice gratefully received.

Re: Pension Tax Stuff
 

Your bad feeling is correct. Canadian residents must declare all worldwide income.

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Technically. ;)

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Was wondering about the risk/rewards of that :wink_smile:

Maybe I should keep a low profile till I'm 55 and declare then:unsure:

Re: Pension Tax Stuff
 

Your bad feeling is justified unfortunately.

The retirement pension is taxable in Canada. It should not be taxed in the UK. However, you can generally get a credit for UK taxes paid against Canadian taxes owing. If Canadian taxes are higher than the amount withheld in the UK (and they usually are) then you are on the hook for the difference.

Disability pensions are not taxable if:

1) They are paid out of an insurance policy and you paid the premiums from after-tax money.

2) They are paid as a result of injuries sustained in active combat serving in the Canadian forces, or its allies in WWI or WWII.

3) They are paid as a result of injuries sustained whilst serving with the RCMP.

Unfortunately there is no reciprocal agreement with police disability pensions. You might want to read http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html.

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Thanks for this, even if it is horrible news!

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And the penalties for not reporting are severe. Report it before CRA find out, once an investigation starts (if it does) then you cannot come clean and penalties and interest apply. You also need to report any foreign assets valued at over $100k if your bank account is over this amount. The penlites for not reporting are quite high. You may want to get an accountant to file an adjustment for you PDQ.

Re: Pension Tax Stuff
 

Yes, it's time to sort this mess out, bugger!

Re: Pension Tax Stuff
 

Here's what you do. Download the form Canada Individual and guidance notes from HMRC website. Strangely it doesn't have a number but you can get it here;
www.hmrc.gov.uk/cnr/canada-individual.pdf

You send it back to HMRC and they refund the UK tax you paid for five years.
You have to also send proof of residence in Canada which you obtain from Revenue Canada.

Also if income from the UK is not taxable then it is not taxable in Canada either which should apply to the injury part of your pension.

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Not necessarily. I receive two Army pensions (War Pension and another, I can't remember which, both of which arose from a medical discharge), both of which are paid tax free in England, both of which I must pay tax upon in Canada.

Re: Pension Tax Stuff
 

Do you have any reference for this?

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Re: Pension Tax Stuff
 

IT-365R2

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<opens beer, relaxes>

Re: Pension Tax Stuff
 

Canadian Forces = no tax on injury pension
UK Forces = no tax etc
RCMP = no tax etc
UK Police = tax on all including non taxible (in UK) injury pension = disaster if verified!

Thanks all for input, but I better seek legal help.