Capital gains tax between UK and Canada

[kennedyboy76]

Hello. My wife and I moved from the UK to BC, Canada in 2007. We bought our first home here that year and lived there until 2014. We then sold it and bought another property here which we currently live in. We both work here and do all our tax returns here in Canada. We are now also Canadian citizens but have both maintained bank accounts in the UK and have our UK mail etc delivered to our parents addresses in UK. Due to an opportunity which came up between 2010 and 2014 I was able to use savings and some loans from my dad to construct a property in my home town in the UK. It has been complete since last June. We built it as an investment and also with the plan to return to the UK and live in it eventually. I have no mortgage on the UK build. My question is where does this leave us from a tax standpoint. The Canadian government is not aware of this house and if we were to sell our house here it would be selling our primary residence so we would not be liable for capital gains. If we sold up here in Canada and returned to live in the UK house that would then be our primary residence. I'm really confused as to where that leaves us from a tax standpoint? Any help would be greatly appreciated thanks

Alan

[maths]

Bit unclear as to what you are asking.

You are not resident in the UK. You are therefore only subject to UK income should you receive UK source income (eg rents from your newly built property). You would also be subject to UK CGT should you sell the UK property.

Your domicile status prima facie for UK tax purposes continues to be UK and hence you are exposed to UK IHT on worldwide assets.

[kennedyboy76]

My question is if I sell my property here in Canada and return to live in my house in the UK where does that leave me from a capital gains tax standpoint. There are no records here in Canada that I even own the house in the UK as I built it after leaving the UK 10 years ago. Will questions be asked when I transfer the sale proceeds of Canada house from canada into my uk bank account?

[David Geordie]

I have a very similar situation. Expat Brit now dual national Brit/Canadian. I bought property in the UK as a hedge in case we decided to return to UK later in life. I've been thinking a lot about my tax situation as there are significant implications if you get it wrong. Here's a synopsis of how I see things here:

You are supposed to declare overseas investments on your Canadian tax return.....this includes property but with some exceptions. These exceptions ar driven by the use of the property. If it's rented then it's considered an investment and you need to declare the value as a holding and you need to account for the income on your Canadian taxes. To make it more complicated, if you advance renting it, you also have a tax liability in the UK. However, Canada and UK have a tax treaty that means that's you don't get taxed twice, but it's a pain as you have to file in both countries.....Canada first as the tax year finishes first.....then uk. After you file your uk return you will get foreign tax credits from HMRC which you then use to file an adjustment to your Canadian return to get your tax refund.

If your property is not rented, and is reserved for your personal use, then you do not need to declare the asset value on your Canadian tax return.

Now, here's a wrinkle......if you leave Canada to live permanently in the Uk, then Canada views this like you died. All your assets become deemed disposed and any increase in value is regarded as a capital gain and Canada wants its slice of that gain before you leave. This applies to your worldwide holdings I believe, so moving into your home in the UK after leaving Canada could trigger a capital gain issue as Canada would deem that you had in effect sold the property to yourself at the current market value ergo realizing the gain a te difference between market value and your acquisition costs. This certainly applies to assets in Canada.....eg a cottage or stocks you hold.....which would be deemed disposed upon exit from the Canadian tax system whether you sell them or not......but I'd sugggest getting tax advice from a specialist to confirm how this would apply to property abroad.

Sorry is this doesn't help, I, still working this thru so haven't got a complete picture yet.