Jobs & Money Detail
Money moves to Canada
If you were just moving yourself to Canada, emigration would be so much easier, but you wouldn’t want to leave your money behind, would you?
Here, British emigrant and financial expert Steve Kennard, answers your queries.
Dear Steve,
I have two questions for you.
Firstly, I will be receiving rental income from England. What would be my tax status on that income? Do I have to pay tax in England or in Canada?
Secondly, someone told me that if I make a trust than for the next five years my income worldwide will be tax-free in Canada. Can you please advice me on that issue? How does it work and how can I set up that sort of trust and will it be beneficial to me?
Steve Kennard replies:
Firstly, you will be required to file a UK tax return for any income relating to the rental property, you would also include any other UK income. You are able to claim a foreign tax credit on the Canadian tax return for any taxes paid to the UK because you are likewise required to report worldwide income on the Canadian tax return including the rental and other income from the UK.
Please ensure that if you are leaving a property in the UK and it is your principle and only residence:
a) If it was your principle residence, then have it valued as at the time you are leaving. You are able to designate your UK house as remaining as your principle residence for up to four years so long as you do not take any Capital Cost Allowance (relates to rental properties) and also do not purchase a property here during the four years. As soon as you purchase a second property in Canada your rental will become subject to normal Capital Gains rules, so again should this happen have it re valued at the time you purchase.
b) If it is a second property now, then have it valued because it will be subject to normal capital gains rules in Canada from the date you arrive. There may well be a tax liability to the UK which takes into account any increase in the value during your ownership, so speak to the Inland Revenue to clarify the position.
As regards your second question, there is a provision to put everything into a trust before you arrive here. However, the trust will need to be set up in the UK and would come under UK trust rules for the life of the trust and subject to UK taxation should their be any. You should consult with a financial advisor and the Inland Revenue before making any decisions on a trust.
Dear Steve,
Can you advise as to what taxation there would be on a lump sum of money transferred from the UK to Canada? Thank you.
Steve Kennard replies:
It depends on the reason for the lump sum.
If you are moving to Canada and this is just the combined lump sum that you will be bringing, consisting of:
Proceeds of bank accounts;
Proceeds from sale of principle residence;
Proceeds of any sale of investments; and
Proceeds from the closing of any pension plans etcetera.
Also, if any of the above cash which has any tax implication has been reported or will be reported on a UK tax return then there should be no tax implication on entry into Canada (if you are arriving with a letter from Immigration Canada stating that their residency has been approved you should take with you the information relating to the amount of transfer also a copy of any shipping documents for the Canadian customs to see).
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