Another Tax Question

mullinsky
Junior Member



Joined: 04 Apr 2008
Posts: 11
Location: London England

Posted: Tue May 13, 2008 1:49 pm

 

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ok, so from what i have read and have been told after you're out of Canada for two years they supposedly no longer care about your income. Is this true? Or is this two year thing a hoax? I have been in the UK since Jan 08 and I do not think Canada even knows I am here. I did not do any of that claiming to be a non-resident stuff. I still have bank accounts and credit cards etc.

I just want to know if I need to even bother filing my income tax with Canada since I do not plan on working there for 2-4 years at all. If what I am told about the two year thing is correct, then Canada just does not care about me after 2 years, right? All the countries I am going to be working in have tax treaties with Canada as well.

Lastly, does this 2 year thing mean I have to actually stay out of Canada for a full two years, like no going home to visit for X-mas etc. Or is it just a no working and making income in Canada thing?

If anyone knows of a good international accountant for stuff like this I am all ears.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 739
Location: Calgary

Posted: Wed May 14, 2008 11:32 am

 

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If you have residential ties to Canada, you have to pay tax in Canada. There is no "two year" rule, first I've heard of it.

You can request a ruling from the CRA on Form NR-73. If you never declared that you were non-resident, they will consider you to still be resident, so you will face filing penalties and late payment penalties, as well as dual taxation on any income you earned in the UK.

To get the tax treaty exemption, you have to claim it on the HMRC UK-Canada tax treaty form: http://www.hmrc.gov.uk/cnr/form_canada.htm

Your tax liabilty can be tricky to work out because the tax years are different in the UK.

You could move your tax home to the UK, but that only helps from this point forward, not the time up until the time you moved your tax home, and to do that you must sever all residential ties to Canada and inform the CRA on your T1 that you left Canada. Plus you must inform the banks etc. in Canada that you are non-resident so they can withhold Part XIII tax under the tax treaty (which under the UK treaty is 10% on any income, e.g. bank interest).

Where you physically are, e.g. if you visit, isn't that important, it's where you ordinarily reside and make your home that is important for tax purposes. Under UK and Canadian law, spending 90 days in the country is a residential tie unless you claim the tax treaty exemption. I.e. if you do nothing, you're considered to be resident after 90 days. Doing "nothing" means exactly that, if you get a job, etc. those can be considered residential ties as well.

Moving your tax home to the UK means you could become liable to departure tax in Canada, so it's not a good idea unless you're sure you're not going to be hit by it. Generally people who hold significant investments in financial instruments or who hold stock in a private corporation are in the worst situation with the departure tax.

Not a good idea to do it either if you plan on coming back to Canada. Just increases the complexity of the paperwork. The only reason to do it is if you save significant amounts of money being subject to UK tax instead of Canadian tax.
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Steve.

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mullinsky
Junior Member



Joined: 04 Apr 2008
Posts: 11
Location: London England

Posted: Sun May 18, 2008 5:00 am

 

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Ok, so since I did nothing to inform Canada of my departure I am going to get taxed here in the UK and then once again in Canada? So if I am getting taxed %25 in UK will i get taxed the full Canada tax too? Which would be like %35. Or does Canada just tax me the difference?

Also, since I did nothing and have been in UK for 90 days I am now considered a resident, correct? I could severe my ties in Canada but I think that will not work since I have student loans through national student loans and Royal Bank. Those will not disappear.

This tax treaty is confusing, does it mean I would not get taxed here in the UK and only in Canada for my work here in the UK or does it mean I would get taxed only here in the UK and not in canada? I just refuse to get double taxed, it would take half my earnings. Total bs.

What I do not understand is how will Canada find out I was making money here in UK unless I tell them? There are hundreds of Canadians who work on Yachts and cruise ships on the ocean all year and they never claim anything to Canada. Wouldn't a low or zero income for 2 plus years in Canada for someone doing that set off a red flag? Wouldn't these people get stung or caught by revenue Canada? My friends who did it have not herd boo about it and never claimed jack.

Couldn't I just pretend I was on a yacht and not claim anything? I am on a working holiday maker visa. So technically I am here to travel, not work. So a low income or a zero income while on one of these happens often I am sure. I am trying to gauge the possible penalties with this situation and my issue of not claiming non-residency.

I plan on going back to Canada to live after my travel etc, so i do not want to screw it up or complicate it in any way. But I also do not want to get stung with taxes up my arse, if you get me.

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klynch
New Member


UK & CANADIAN TAX

Joined: 07 Feb 2008
Posts: 8
Location: Cheshire

Posted: Tue May 27, 2008 11:58 am

 

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I am a UK chartered accountant and Canadian CGA in practice in the UK. I can offer a tax return and refund service and tax advice at reasonable rates.

Check my website - lynch.pro

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 739
Location: Calgary

Posted: Tue May 27, 2008 9:41 pm

 

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How it works is that you are exempt from paying UK income tax if you claim the tax treaty exemption. You only pay tax in Canada and file a Canadian return, and report all your income on your T1. Tricky to do as the tax years are different.



How to fiddle your taxes is not something I can really comment on. Suffice to say it's illegal not to report your worldwide income to the CRA (not to mention any foreign assets valued at over $100,000 on form T1164) if your tax home is in Canada. Ditto for the UK if your tax home is in the UK.

The more bizarre and unlikely your tax return, the more likely you are to get audited.

I've actually been in the basement of an HMRC office in the UK, where they have staff who just sit there all day going through the classified ads in the paper and checking those people against what they've declared on their self-assessment. Plus they even do surveillance if they're really suspicious.
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Steve.

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