Ed Troup (now Head of HMRC – in a 1999 newspaper article)
This final installment in a trilogy of posts detailing the transition of my tax affairs from the UK to Canada over the last year (previous episodes here and here) may seem somewhat dry reading, but it might also provide at least some useful information for those who find themselves in the same boat.
As mentioned previously I had taken advice from HMRC in the UK before we left for Victoria. One of the suggestions that they had made was that I should write to them setting out in detail our intentions and proposed schedule. This I did – if for no other reason than that it is always a good idea to get such things down in writing and to file a copy for posterity.
Income tax in the UK is collected through a Pay As You Earn (PAYE) system which relies on each individual being ascribed one or more codes which determine how much tax is deducted each time an income is payed. My income before retirement fell into a higher tax bracket, which in turn meant that the two pensions that I was already drawing at the start of the 2015/16 tax year were also taxed at that level. When I retired and started receiving my third and final pension (but stopped receiving a salary) the tax codes for all three pensions should have been changed to reflect the fact that my income no longer merited being taxed at the higher level. Once we had become Canadian tax residents the codes should have been changed again to ensure that I was no longer taxed in the UK at all.
Naturally, ensuring that these codes were all corrected at the appropriate times proved to be far from simple. They should have been updated as a result of communications from my final employer when I retired, but in the event I still had to spend some considerable time on the phone from Canada to the HMRC arguing the case before all three pensions were finally being taxed at the basic rate. HMRC then had to pay me a rebate for overpaid taxes – which they duly did.
Once my tax status as a resident of Canada had been confirmed by Revenue Canada and the consequent paperwork forwarded to HMRC there followed another round of ‘negotiations’ before all three pensions finally became un-taxed in the UK. I had by this point already been taxed in Canada for the year to December 31st and I was looking forward to recovering the monies that had been deducted in the UK since our departure in July. A further conversation with HMRC made it clear that this wouldn’t happen until I had completed and submitted a tax return for the 2015/16 tax year in the UK.
Filling out that tax return was quite a mission in itself and entailed another couple of hours of phone calls to HMRC before I was satisfied that I had accurately particularised our situation.
Having ventured thus far with my explication I firmly intend to document that process as well – though I fear that so to do will entail a fourth post. Ah well!