Deemed dispostion and re-aquisition on emigration from Canada to UK

[andrews65]

Hi, I'm hoping someone can confirm my thinking here ....

My wife and I reside full time in Canada, since 2017. We have currently no relationship with HMRC, only with Canada Revenue Agency (CRA).
At some point in the next decade we will likely retire back to the UK (we're both British).
We own significant share and mutual fund assets domiciled in the UK, and when we leave Canada we will have to pay a "departure tax" to CRA based on the capital gains of our assets during our time as Canadian residents - a 'deemed disposition' even though no disposal has occurred.
At some point after our immigration to the UK I will want to gift some of my assets to my wife, in order to bring our retirement incomes in line with each other.
My question is if I make this gift, what CGT will my wife pay to HMRC when she disposes of the assets? I'm hoping the gain is based on the asset price at the time of "re-aquisition" when we immigrated into the UK.

Grateful if anyone can confirm! thanks.

[jerome.lane]

Transfers between spouses are generally on a no gain no loss basis so the gifts you describe should be tax neutral.

[andrews65]

Transfers between spouses are generally on a no gain no loss basis so the gifts you describe should be tax neutral.

Thanks for the reply. Tax neutral at the time of gifting, yes. But I'm asking about the tax implications at time of disposal by the giftee (my spouse). For example:

I bought an asset in 2014 for GBP10000
The asset is worth GBP30000 when we emigrate from Canada (lets assume this will happen in 2025).
I pay a CGT "departure tax" to the Canadian tax man based on a deemed capital gain of GBP20000.
We arrive in the UK and I subsequently gift the asset to my spouse (value still GBP30000)
In 2027 she sells the asset for GBP40000. What capital gain is used to assess the CGT on this disposal?

I'm hoping the answer is GBP10000.

[jerome.lane]

Aha! The basic rule is that, after a gift to your spouse, their base cost is your acquisition price. The legislation specifically disallows expenditure in connection with a deemed disposal or acquisition for UK capital gains tax purposes. Your gift will be a deemed disposal in the foreign jurisdiction and any associated costs, including jurisdictional exit charges, are not recognised for UK tax purposes. The tax paid is not allowable as a deduction in working out the gain.

Article 13 (10) of the UK Canada double tax treaty states:

10. Where an individual ceases to be a resident of a Contracting State and by reason thereof is treated
under the laws of that State as having alienated property before ceasing to be a resident of that State
and is taxed in that State accordingly and at any time thereafter becomes a resident of the other
Contracting State, the other Contracting State may tax gains in respect of the property only to the
extent that such gains had not accrued while the individual was a resident of the first-mentioned State.
However, this provision shall not apply to property, any gain from which that other State could have
taxed in accordance with the provisions of this Article, other than this paragraph, if the individual had
realized the gain before becoming a resident of that other State. The competent authorities of the
Contracting States may consult to determine the application of this paragraph.

This would appear to give you a get out in that the article appears to ensure gains subject to an exit charge aren't taxed again. You should get formal advice to confirm this ahead of your return as things do change and I don't have all the facts. The position would certainly be different if you returned within 5 years.

[andrews65]

Thank you very much Jerome.Lane. As you suggest I will get formal advice before moving but that excerpt from the tax treaty suggests I'll only be taxed on the gains not already taxed by Canada, which is what I was hoping for.