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Thanks for all the fish

November 1, 2016 in Moving to Canada | Permalink

Image from PixabaySo Long, and Thanks for All the Fish

Douglas Adams – Book title

Pace the promise at the end of my last post (the final part of a trilogy on my tax transition from the UK to Canada over the last year) this unexpected fourth part details the delightful process of completing a reasonably complex UK tax return. The gentle reader will be relieved to know that I am going to skip all of the obvious bits and just concentrate on that which is out of the ordinary.

Completion of this particular return was complicated by the fact that – having been resident in the UK for 104 days from April 6th to July 19th 2015 – I was considered by HMRC to have been a UK resident for tax purposes for the whole tax year. To avoid being taxed in both countries for the period from July 19th 2015 (our date of landing) to April 5th 2016 (and having already paid my Canadian taxes up to December 31st) I needed to meet the criteria for a ‘split year treatment‘ for 2015/16, under which I would pay taxes in whichever country I was resident at any given point.

There are eight sets of circumstances under which one is deemed to have met the criteria for ‘split year treatment‘. The only one that applied in my circumstances was Case 3 – ‘Ceasing to have a home in the UK’. The HMRC’s ‘Tax Return Notes’ give a fair bit of information on the criteria as a whole but cheerfully send one off in search of document RDR3 – ‘Guidance Note: Statutory Residence Test (SRT)’ for further detail on each specific case. Herewith the relevant sections for Case 3:

Case 3:  Ceasing to have a home in the UK

5.22  In this instance, you may receive split year treatment for a tax year if you leave the UK to live abroad and you cease to have a UK home.

You must:

– be UK resident in the tax year
– be UK resident for the previous tax year (whether or not it was a split year)
– be non-UK resident for the following tax year
– have one or more homes in the UK at the start of the tax year and at some point in the year cease to have any home in the UK for the rest of the tax year.

5.23  From the point you cease to have a home in the UK you must:

– spend fewer than 16 days in the UK
– in relation to a particular country, either:

– be present in that country at the end of each day for 6 months, or
– have your only home, or all your homes if you have more than 1, in that country within 6 months

Hmmm! That is all as clear as mud…

The other portion of the return that I had not previously encountered was that concerning Capital Gains Tax – for which the sale of our UK property made us potentially liable. The basic rules regarding Capital Gains Tax on property sales at the time that we sold the apartment were thus:

  • Capital Gains Tax could be subject to Private Residence Relief (PRR)
  • PRR was 100% if the property was one’s prime residence and was lived in for the whole time that it was owned
  • PRR might be reduced if the property was let for more than three years
  • no tax was payable in any case for the final 18 months of ownership

Our apartment in Buckinghamshire (which I had owned for more than fourteen years) had been let for more than three years at the point at which we sold it. We thus had to work out the level of PRR for which we might still be eligible. This was calculated by determining the profit made on the sale (the agreed selling price less the original purchase price) and by determining the percentage of months for which PRR might be applied. I had owned the property for 176 months, I/we had lived in it for 130 months and it had been let for 41 months. Given the exemption for the final 18 months of ownership this meant that I could apply for PRR to cover 84% of the capital gain.

That would yet have left a chunk of tax owing, but there were – fortunately – a couple of other reliefs that could be applied:

  • Selling costs (estate agent and legal fees) could be set against the profit
  • We could apply for Letting Relief for the period that the apartment was actually tenanted
  • There was a general Capital Gains Tax allowance of £11,000

A tortuous calculation led us to the conclusion that all of the potential taxes and reliefs fundamentally cancelled each other out – leaving us after all nothing to pay on the sale of our home. The tax return was duly completed and sent to the United Kingdom at the start of June this year. Shortly before I started writing this series of posts I was finally in receipt of a further rebate from HMRC, though they also sent a note which somewhat unkindly suggested that this refund had been based on my calculations – which they claim not to have checked! I suspect that this is just to give them some wiggle-room should they find any way that they can claw back some of what they paid me.

We shall see…

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Legalised extortion

October 28, 2016 in Moving to Canada | Permalink

tax“Taxation is legalised extortion and is valid only to the extent of the law.”

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!

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The price we pay

October 25, 2016 in Moving to Canada | Permalink

Photo by Andy Dawson Reid“Tax is not a four-letter word; rather, it’s the price we pay for the country we want.”

Alex Himelfarb

My last post went some way towards explaining the vexatious complexity of our tax affairs upon leaving the UK last year and heading across the pond to Canada. I promised – for those who simply could not sleep without knowing how the issues had been resolved – to reveal all. As I am (mostly) a man of my word…

I had, naturally, taken the trouble to consult Her Majesty’s Revenue and Customs (HMRC) well in advance of our departure from the UK to discover exactly what steps would need to be taken to ensure that I ceased paying tax in the UK on our departure and started so doing in Canada. A most Helpful Young Chap had given me chapter and verse… though as it turned out not all of the chapters and rather less verse than he might have!

He did advise that I should acquire – from the HMRC website – “Form Canada-Individual” (for those seeking this document it should be noted that it does not – unlike most other HMRC forms – have a form number!). At the bottom of the first page of this document there is a box labelled “For use by Canada Revenue Agency” and the guidance notes helpfully state that once completed the form should be sent to the “Tax Services Office of the Canada Revenue Agency for the area in which you reside“, for them to stamp and to sign. The HYC from the HMRC was unable to elaborate further on this instruction so I figured I would have to wait until we got to Canada and to ask questions there.

A few days subsequent to our arrival I paid a visit to the Revenue Canada building in Victoria, thinking that this would be the best way to find out whom I should approach. The Canada Revenue office may well be open for business but the building itself certain isn’t – not to the public at any rate. There is no open foyer or reception desk – just tight security and locked doors. I was forced to resort to the InterWebNet instead and – taking what seemed the best bet – sent my “Form Canada – Individual” to the Revenue Canada office in Vancouver.

Nothing at all happened for two months but eventually a reply limped into our mailbox. According to Revenue Canada Vancouver my application could not be processed because I had not provided them with my Social Insurance Number (SIN). This was – of course – because I had not been able to ascertain from anyone what the correct procedure was. I duly added the requested information and resubmitted the whole application – as directed by Vancouver – to Ottawa.

This time a mere month elapsed before Revenue Canada once more returned my application. Apparently they did not have the required information to determine that I truly was now a Canadian Resident for tax purposes. I would needs complete and return Form NR74 – “Determination of Residency Status (Entering Canada)” along with my resubmitted application before they could proceed.

Manfully resisting the temptation to enquire as to why Revenue Canada could not have sent me this form the first time they returned my application, I duly completed it. I could not help but notice that the information requested was mysteriously similar to that already submitted on “Form Canada – Individual” – but thought it best not to point this out either.

Another hiatus ensued.

Eventually – some six months after setting the whole process in motion – I finally received from Revenue Canada the duly stamped and signed copy of “Form Canada – Individual“, which I promptly sent back to HMRC in the UK. I was now registered as a tax payer in Canada – effective from the date that we landed.

Now – the Kickass Canada Girl has a long-standing relationship with a tax accountant in Victoria, who agreed to handle my tax affairs as well as the Girl’s. She was most helpful to us both in completing our tax returns following the end of the 2015 tax year on December 31st. Our attention was drawn to some highly beneficial rebates of which we would not otherwise have been aware and – as a result – my tax bill was considerably less scary than it might have been.

All that remained was for me to persuade HMRC to stop taxing me a second time (or first – if you see what I mean) in the UK and to return any excess tax that they might already have deducted.

The tale of how that went must – however – wait for next time.

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The hardest thing

October 21, 2016 in Moving to Canada | Permalink

pieter_brueghel_the_younger_paying_the_tax“The hardest thing to understand in the world is the income tax.” 
Albert Einstein

I have been meaning for some little while now to draft a brief disquisition on the subject of taxes – with particular reference to the effects thereon of relocating to a different continent. Though circumstances are – in term of taxation – really quite different from case to case, it is yet possible that my recent experiences in the field may be of some small use to someone somewhere.

That I have not until now carried out the electronic equivalent of putting pen to paper can be readily explained. Our situation featured certain complexities which have complicated the transition considerably. It is only very recently that we can state with reasonable confidence that our tax affairs have now been put in order. We have yet to receive final written confirmation that this is the case, but the omens have a propitious look about them.

It is a basic principle of income taxation that the norm is for all such to paid in one’s country of residence. There might well be exceptions should one be in receipt of income from territories other than that in which one resides, unless there exist between said nations a reciprocal tax agreement. The United Kingdom and Canada have just such an agreement.

On moving from the UK to Canada there is a supposedly relatively simple procedure to follow to ensure that one stops paying tax in the former and commences so doing in the latter. Of course, such things rarely turn out to be simple in practice, though that has much to do with the degree of tax complexity to which one is subject.

In my case the situation was complicated by the following factors:

  • I retired part way through the 2015/2016 tax year. I paid income tax at above the basic rate on my salary until that point.
  • I was already drawing two of my three employer’s pensions from the start of the year. These were also being taxed at the higher rate.
  • When I retired my final pension kicked in, though of course my salary stopped at the same time. I was still being taxed at the higher rate even though my income no longer merited such.
  • Two weeks after retiring we moved to Canada and I became a tax resident here. My pension incomes are all paid in the UK and transferred monthly to Canada, but because the UK uses PAYE (Pay as you earn) I was still seeing tax deducted at source in the UK. I was thus for a period being effectively taxed in both countries – though in Canada (which does not have PAYE) payment was not due until the end of the tax year.
  • We sold our property in the UK a week before leaving the country. Normally the sale of one’s primary residence in the UK does not attract capital gains tax. We had – however – been living in a rented apartment for our last four years in England, and had tenants in our apartment. In such circumstances the rules are different and capital gains tax can come into play.
  • The UK and Canadian tax years do not coincide. In Canada the tax year runs quite logically from January 1st to December 31st. In the UK – as you might expect – the situation is quite different and the year runs from April 6th to the subsequent April 5th.

I fear that I can only subject myself to a certain level of tax contemplation at any one sitting. A subsequent post (or posts!) will thus be necessary to guide the gentle reader through how the process of tax transfer was effected in our case.

Something to look forward to!

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Three storms

October 17, 2016 in Life in BC | Permalink

Image by NASAHot on the heels of the first storm of the season – mentioned just a couple of posts back under the banner ‘Pillaging just for fun‘ – the end of last week found the coastal region of BC under threat of attack from three more storms. These vigorous systems were the tail end of Super Typhoon Songda that had tracked across the Pacific, making landfall on the northwest coast in waves on Thursday, Friday and Saturday last.

Environment Canada were taking no chances with their forecasting – predicting that each storm would be stronger than the last, climaxing on the Saturday night with winds approaching 100km/h (62mph) – one of the severest weather events over southern Vancouver Island for a decade or more.

Now – we Brits have form when it comes to the forecasting – or mis-forecasting – of serious weather conditions. Weatherman Michael Fish made something of a career out of having infamously told a lady caller that the rumours that she had called to report of a hurricane approaching the south of England one evening in mid-October 1987 were false – the night that trees over swathes of the south east were laid waste by winds gusting to 130km/h (81mph). Ever since that night the Met Office have – to all appearances – tended to exaggerate the potential for damage rather than run the risk of getting caught out again. As a result Brits tend to take these things with a hefty pinch of salt.

I was not altogether surprised when some of the dinner guests we were expecting for Saturday evening cried off during the morning – sensibly not wanting to get caught out in the storm. Given the regularity with which BC’s pole-carried power lines are taken out by tumbling timber (and of course the fact that pretty much everything in our home operates courtesy of BC Hydro) it also seemed sensible to purchase a few precautionary items from Canadian Tyre… a propane cooking stove and some battery-powered lamps for example. I was a bit taken aback upon reaching the store, however, to find that the shelves were largely empty of such items. It would appear that everyone else hereabouts was also taken by surprise by what is, after all, a pretty common occurrence. I took the last propane stove and improvised with some garage (shop) working lights.

Back at home and well into late afternoon the nearest of the Gulf Islands abruptly disappeared from view and the pines and firs surrounding our small estate started to pitch and toss vigorously. The weather channel played continually on the TV as we waited for the power to cut out at any second. We fired up our new gas log fire and hunkered down to sit it out.

Within half an hour all was suspiciously quiet again. The nervous looking weathermen continued to predict the apocalypse to come – but outside our windows the weather stubbornly refused to play ball. The weather system had apparently had a change of heart and buggered off further up the coast.

Anyone need a propane stove and some battery-powered lamps?

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Cinquecento

October 14, 2016 in Getting started | Permalink

Image by David Bellot - Berkeley, CA, USAWell – who would have thought it?

It is to be hoped that the gentle reader might indulge me just a little if – with not the slightest intention of sounding my own shophar –  I express my astonishment at the relative longevity of this enterprise…

…by which I refer, of course, to this attractively eccentric almanac!

Yes – since I took my first faltering footsteps into the anarchic world of blogging on January 26th 2012 I have contrived to make additions to this agglomeration of arbitrary articles at roughly bi-weekly intervals. The end result of all of that tapping and scratching is (and I know that you have been keeping score!) that this is the five hundredth post since the imperceptibility of the immigrant was first imparted.

Very many humble thanks to all of those die-hards who have stuck with it.

I think a small celebration might be in order – and as that is something that is decidedly better done in the ‘real’ world rather than in the ‘virtual’, the Kickass Canada Girl and I will just have to do something appropriate here in BC! The reader may choose to take the opportunity to raise a glass for this (or indeed any other) reason at his or her own whim or fancy!

Cheers to all!

 

PS – Serious kudos to anyone who can glean the relevance to this post of the image thereto attached!

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Pillaging just for fun

October 11, 2016 in Life in BC, Photos | 2 comments

“The autumn wind is a pirate. Blustering in from sea with a rollicking song he sweeps along swaggering boisterously. His face is weather beaten, he wears a hooded sash with a silver hat about his head… The autumn wind is a Raider, pillaging just for fun.”

Steve Sabol

It is a matter of enviable fact that during 2016 the southern end of Vancouver Island enjoyed a seriously spanking summer. Dry and hot much of the time for a second year in a row El Niño conditions saw western Canada basking joyously, though British Columbians’ feet were kept firmly on the ground by the inevitably wild, wet and windy winter that separated the two summer seasons.

There is even talk that the La Niña event that usually follows El Niño may not after all happen this year, which means that the winter may be less extreme than it might otherwise have been. There is – nonetheless – no denying that over this Thanksgiving weekend the autumn (fall!) has put in an early appearance. The first storm of the season stuck on Thursday evening and the first power outages followed shortly thereafter. We lost our supply for about an hour and a half in the middle of the evening and we were very grateful that we now have lovely gas log fire in our drawing room to keep us toasty warm (our furnace being electric!). On the Saturday we had rain… solid rain… all day…

Today, however, we got out and about and I took the chance to grab some autumnal photos.

Photo by Andy Dawson ReidPhoto by Andy Dawson ReidPhoto by Andy Dawson ReidPhoto by Andy Dawson ReidPhoto by Andy Dawson ReidPhoto by Andy Dawson Reid

 

 

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A good gulp…

October 7, 2016 in Flotsam and Jetsam | Permalink

Image from Pixabay“Suggested remedy for the common cold: A good gulp of whiskey at bedtime – it’s not very scientific, but it helps.”

Alexander Fleming

Bah!

I seem to have acquired a mild but most annoying instance of the common cold.

I say again – Bah!

I write this not to elicit sympathy (though I will naturally not spurn such if offered!) for ’tis but a mild malady and will not last long. I really only mention it because this is the first cold that I have had since moving to Canada more than a year hence. Last winter came and went with not a hint of either a cough or a sniffle.

Such benefits clearly come in part from living in such a healthy environment but I have little doubt that this benediction also emanates from my retirement from a lengthy career in education. For as long as I can recall I have suffered two or three colds a year, one such usually being contracted a couple of weeks subsequent to the start of each term. There is an obvious boon in no longer being forced into extended proximity to a host of germ-laden youngsters!

In any case another consideration must now be borne in mind. The Girl’s new(ish) job brings her into regular and frequent contact with elderly folk. It is clearly imperative that she doesn’t catch anything that might be passed on, so if I do get an attack of the sniffles extra precautions must be taken.

Of course, should that mean taking the occasional additional ‘wee dram’ you would not hear me complaining!

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Wine and sweet words

October 3, 2016 in Kickass Canada Girl | Permalink

birthday-clip-art“Let us celebrate the occasion with wine and sweet words.”

Plautus

The start of October is for us always a period for celebration, for it encompasses the joyous revels that mark the Kickass Canada Girl’s birthday. This year it has also seen the first anniversary of the purchase of our North Saanich abode, so the occasion has been especially elevated.

Some years a great deal of work can go into trying to organise a suitable programme of merrymaking; in others things just fall into place with the least possible effort. This year was one of the latter.

On Friday last one of the Girl’s favourite Canadian miserabilist bands – the Cowboy Junkies – played at the Mary Winspear Centre in Sidney. The Girl was so delighted at the prospect (even more so when I purchased her a ticket!) that she generously decreed that I need not join her for the event. (She once took me to see the Be Good Tanyas at the Albert Hall in London – the which experience equipped me with enough melancholic ennui to last a lifetime!).

Needless to say, the Girl enjoyed the concert greatly – even though the band omitted to play her very favourite number (in spite of announcing that they would do so! I think this was just done to make everyone even more miserable!).

Scarce had twenty four hours passed than we were back at the Mary Winspear with our dear friends from Saanichton to attend yet another musical soiree – this time featuring Séan McCann – erstwhile singer and guitarist with Newfie folk/rock band – Great Big Sea. Now, Séan isn’t miserable at all. In fact he is really quite chipper, particularly since abandoning the bottle (and, indeed, Great Big Sea!) a few years back. He was in fine voice and made sure that all present had a really good time.

Sunday afternoon found us – yet again in the company of our lovely friends – back at the Belfry Theatre for the first of this year’s season ticket productions. The play – a slightly puzzling ‘contemporary’ take on Henry VIII’s last wife, Catherine Parr* – might not have been the best thing that we have seen at the Belfry (in fact it was quite some distance therefrom…) but it was none the less a nice way to round out the weekend.

All that remained was for me to whistle up on the barbecue (for the operation of which I still bear my ‘L’ plates!) a hefty but most succulent piece of rib-eye and to uncork a rather spiffing southern French red. Cheers!

A very happy birthday to the Kickass Canada Girl!

 

*Drat! I realise that in the first published version of this post I missed the opportunity to describe the production as ‘below par’! Oh well!

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The worst form of government

September 30, 2016 in Life as we know it | Permalink

ballot“Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time.”

Winston Churchill

Following the abrupt and unlooked-for result of the EU referendum in the UK at the start of the summer the British Labour Party has set about sustaining the sensation of stupefaction amongst the good inhabitants of that bewildered territory by doing its best to tear itself apart. The challenge by one hundred and seventy two members of the Parliamentary Labour Party to the stewardship of its previously unexpected leader, Jeremy Corbyn – based notionally on his perceived non-electability in a general election – reached its denouement with his re-election as leader with an increased majority of party members’ votes.

Might this be the end of the matter? Hell no!

The battle behind the scenes is not just about the party’s chances in the next general election. It concerns rather the wildly differing views of the nature of democracy itself held by the constituent members of the organisation. Fundamentally, those to the left of the party do not believe in parliamentary/representative democracy. The idea that those who are chosen to represent the electorate should be gifted power once every five years, on the basis of an agreed manifesto, is anathema to those who believe that ‘true’ democracy requires rather that power should rest continually in the hands of its party members.

To those who wish to be constantly engaged in politics this is perhaps understandable. British democracy – as in many other parts of the western world – is predicated upon a direct but limited connection between the electorate and those who represent them. Once elected the members of parliament are largely protected from interference by those who put them there – until subsequent ballots allow the electorate to issue a judgement as to how well – or how badly – they have performed. This actually suits the majority of voters well – preferring as they do not to have to think about the grubby business of politics more than is absolutely necessary.

To those on the further left such a state of affairs will not do at all. These people hold the view that the members of a political party should be able to exercise judgement on its elected representatives at any point by de-selecting them should they be deemed not to have toed the party line. Further, these zealots would like to be able to dictate policy through decisions taken by the membership at party conferences. It should be clear that this could well mean that the wider electorate could not only lose the ability to pass judgement themselves on their chosen representatives, but that they might also wake up to discover that the party for which they had voted no longer subscribed to the manifesto on which they made their choice. By such means the actuality of democracy would be re-calibrated away from the involvement of the forty six million plus who make up the total electorate toward the half a million or so who are members of the Labour party.

When it comes to the hard core – of course – there are those on the left who do not believe in party democracy either. They are playing a long game in which they believe that ultimate power rests with a smaller number of party activists who – in the longer term – can utilise a palette of well documented strategies to ensure that the motions adopted as a result of ‘democratic’ votes are those of their preference. Such devious manipulations are – naturally – to be kept at arms length from those in charge of the party, but to those of us who witnessed such methods in use during the 1970s and 1980s – be it by political parties, trade unions or even in student politics (as did I myself) – present denials that we are in fact experiencing a re-run of that period in the Labour Party’s history ring somewhat hollow.

Churchill quote was apt. He recognised the failings of the UK’s parliamentary system, but he was also right that pretty much anything else would be worse. Certainly recent experience should warn the nation away from any experiment which attempts to extend democracy by increasing the use of referenda. My view – which I have long espoused and which I have seen championed increasingly across the various media in recent weeks – is that the most effective way to improve democracy in Britain would be through electoral reform.

That the Labour Party is vehemently opposed to such a course speak volumes.

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