Canadian Earning Income From UK Employer

I am a Canadian National with the Right of Abode in the UK.

I have lived and worked between Canada and the UK for the last 15 years and after spending another 1.5 years over here in the UK, I am considering moving back home to BC again. This time I am thinking about working remotely, from Canada, on a contract basis for my current UK employer.

I am wondering how this will work with regards to tax implications in either country? I believe that I should be paying for tax in only one country but not sure how this all works....I am hoping that someone has some ideas on here and can advise me on how to proceed.

Would I need to become a Ltd Co in one of the countries, or is that irrelevant? If I get paid my income to my UK accounts and pay taxes in the UK and simply transfer monies home to BC...would I be liable for tax in Canada as well? Would I need to file a Tax Return if I haven't earned income in Canada?

As you can see, I am really rather un-knowledgable about the whole situation and would appreciate any insight and advice. It may well be that continuing to work for my employer just isn't going to be possible, but I thought that I would try to do some research first!

Thanks!

This is much much much easier with the UK than with the US, because the UK doesn't require you to file a load of forms to claim a tax treaty exemption like the US does, nor do you need to file a non-resident return in the UK. They have this enlightened attitude that if you are a resident of Canada you automatically want to claim Canadian tax treaty provisions (surprising, I know, at least if you work for the IRS).

If you're working on a contract basis, i.e. you are not directly employed by them and not on their payroll, you simply set up your company in Canada however you want to do it, e.g. self-employed, corporation, etc. and the business sends them an invoice. They send you money. You declare the income on T1 or T2 as the case may be.

It's really simple. In fact it's even simpler than dealing with a Canadian client because the GST is zero-rated so you just put: "GST at 0%: $0.00" at the bottom of your invoice with your GST number.

Whether you want to use a corporation or be self-employed really depends on your income and your expenses, any Canadian accountant can help you figure that one out, the only thing I would mention is that you need to be careful if you decide to start up a corporation because you must keep your tax home in Canada if you do that. You cannot move to the UK or anywhere else and become a tax resident there without changing the status of the corporation, in addition if the corporation is worth anything signficant (or indeed any business you set up) you may become liable to departure tax.

The other small wrinkle is the exchange rate, get them to pay you in Canadian dollars and wire it to your Canadian business account if at all possible. Otherwise you're going to incur lots of charges moving the money over when they pay you. Failing that, agree a fixed exchange rate with them so you don't suffer too badly when the pound falls.

Expenses can be complicated to claim as well if you incur them in the UK.