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Where Taxpayers and Advisers Meet

Savings & Investments in Canada

mike_302
Posts: 17
Joined: Sun May 06, 2018 10:18 am

Savings & Investments in Canada

Postby mike_302 » Thu Jul 12, 2018 1:56 pm

I have investments in Canada in the form of ETFs and stocks -- typical positions to have, and nothing fancy or complex. They don't generate the kind of income (dividend, distribution, or capital gain) that puts me above any of the UK personal allowances.

Discussing how to assess these with TaxAid, it was suggested that I refer to the double-taxation agreement with Canada and the UK, which makes a lot of sense. Then I would look at these incomes as they are -- dividends, fund distributions, and capital gains/losses; and since the incomes are smaller than the personal allowances, my life is easy and no further tax to pay. TaxAid suggested the Offshore tax manual was not applicable to my individual case, and it was targetted at much larger fund managers and people with millions in complex fund schemes.

However, the HMRC won't give me a straight answer if this is the correct interpretation. Some of their agents have pointed me to the Offshore Tax manual, which complicates the reporting of capital gains -- mainly, the gains will count as annual income and taxed at my tax band (basic rate).

I can't get the HMRC to help me on this. Their line keeps failing, and when I ask to escalate to a technical person who can answer more complex foreign tax questions, they don't ever call back. Sometimes they say they'll send me the right reference documents, and end up sending me a copy of the Offshore manual and the standard documents for how to report your capital gains...

Can anyone clarify the conflicting points of view here?

maths
Posts: 7405
Joined: Wed Aug 06, 2008 3:25 pm

Re: Savings & Investments in Canada

Postby maths » Thu Jul 12, 2018 5:30 pm

If you are investing directly in Canadian shares/equities then any income will be foreign dividend income.

Any sales will give rise to foreign capital gains.

Canadian deposits will generate foreign interest.

If you are investing in Canadian based funds then you will need to know if they are Reporting or Non-Reporting Funds (check HMRC website).
Depending upon which, then dictates the UK tax treatment on any sales; income is as above.

The UK/Canada treaty is relevant in so far as it may reduce any withholding tax (if any) levied by the Canadian ax authorities; if it does then you are obliged to claim the reduction.

mike_302
Posts: 17
Joined: Sun May 06, 2018 10:18 am

Re: Savings & Investments in Canada

Postby mike_302 » Thu Jul 12, 2018 9:17 pm

Super :D that does help me -- no one has made it clear until your post, that the stocks/equities would not fall under the Offshore Funds category. So I can deal with all of that.
  • I had £800 capital gain from stocks/equities (less than the personal allowance for capital gains). No tax should be due.
  • I had a £175 in dividend income from stocks/equities. No tax should be due. I also paid a 15% withholding tax on some of the stock dividends already -- I recognise I can't claim that back from HMRC... Fine.
From the ETFs: they are non-reporting, I checked into that already.
I only received distributions from these funds; no sales occurred. So I understand now that the offshore funds manual will not come into play here -- i.e. my income tax will not increase.
ETF distributions from Canada are broken down into various types of income, and I believe from your post that I will simply treat these types of income as per the income for stocks/equities. i.e. the distributions from the funds are composed of:
  • £29 in Capital Gains. Add this to the £800 number from the stocks.
  • £1100 as foreign income distribution*, of which
    • £390 was automatically reinvested in the funds, so...
    • Do I report £1100 or £710 as foreign income distributions?*
*Foreign income distribution:
On the Canadian Aggregate Bond fund, this is reported by the ETF as "Other income".
On the Canadian-based equities fund, this is reported as "Eligible Dividends".
And on the international-based equities funds, this is reported as "Foreign Income".
To the HMRC, is it all just "foreign dividend income", as with the stock dividends, as you say?

mike_302
Posts: 17
Joined: Sun May 06, 2018 10:18 am

Re: Savings & Investments in Canada

Postby mike_302 » Sat Jul 21, 2018 2:51 pm

Hey, question above remains. The first post was really quite helpful! Hopefully you can help me wrap up the understanding.

Thanks,

Mike

mike_302
Posts: 17
Joined: Sun May 06, 2018 10:18 am

Re: Savings & Investments in Canada

Postby mike_302 » Sat Jul 21, 2018 4:36 pm

...the ETFs: they are non-reporting, I checked into that already.
I only received distributions from these funds; no sales occurred. So I understand now that the offshore funds manual will not come into play here -- i.e. my income tax will not increase.

ETF distributions from Canada are broken down into various types of income, and I believe from your post that I will simply treat these types of income as per the income for stocks/equities. i.e. the distributions from the funds are composed of:
  • £29 in Capital Gains. Add this to the £800 number from the stocks.
  • £1100 as foreign income distribution*, of which
    • £390 was automatically reinvested in the funds, so...
    • Do I report £1100 or £710 as foreign income distributions?*
*Foreign income distribution:
On the Canadian Aggregate Bond fund, this is reported by the ETF as "Other income".
On the Canadian-based equities fund, this is reported as "Eligible Dividends".
And on the international-based equities funds, this is reported as "Foreign Income".
To the HMRC, is it all just "foreign dividend income", as with the stock dividends, as you say?
On this matter of how I report the distributions arising from the ETFs, I have this guidance note from the Self-Assessment documentation:
There are specific rules relating to dividends from offshore funds. If the offshore fund from which you've received a payment is substantially invested in interest bearing assets, you're treated as having received interest and not a dividend or other distribution. An offshore fund is an offshore collective investment scheme that may take the form of a non-resident company. Ask your financial advisor or broker if you're not sure whether the shares you hold are in an offshore fund.
This sounds to me like the distributions from the ETFs that are invested in equities (as opposed to the one Bond ETF I have) will be counted as Foreign Interest. But then what to do with the distributions from the Bond ETF?


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