QUESTION: MY SON IS A CANADIAN RESIDENT AND HAS SOLD SOME RENTED FLATS THAT HE HAS OWNED FOR 10 YEARS IN THE UK,HE HAS BEEN A CANADIAN CITIZEN FOR SIX YEARS.WILL HE HAVE TO PAY CAPITAL GAINS TAX ON HIS PROPERTY SALE IN THE UK OR CANADA.IF HE HAS TO PAY IN CANADA AT WHAT PERCENTAGE RATE WILL HE BE CHARGED
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david ingram replies:
Any capital gain is taxable in Canada from the day he became a Canadian resident, not from the day he became a citizen.
So, if he paid $500,000 for them and they were worth $600,000 the day he came to Canada, and he sold them for $1,000,000 today, his UK capital gain would be $500,000 and his Canadian capital gain would be $400,000.
Canada taxes 1/2 of a capital gain so he would owe tax on $200,000. Every province has different tax rates so the following is just approximate. BC, for instance has 6 progressive rates starting at about 22% on the first $35,000 and topping at about 43% over $130,000
Because the six rentals were not his residence before he left, they will be taxable in the UK first.
He will get credit in Canada on line 431 Schedule 1 of his Canadian return for the tax paid to the UK.
The following might help as well
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My_question_is: Applicable to Another Jurisdiction or Multi-jurisdictions
Subject: UK Capital Gains tax on UK Property Sale
Expert: [email protected]
Date: Friday March 02, 2007
Time: 09:31 AM -0500
QUESTION:
Hi - I am a British citizen who has been resident in the US for 11 years, and a green card holder for 8 years. I have a property in the UK which I am considering selling. I have rented it out since I left, and have been paying tax in the US on the rental proceeds. I gather that I will have to pay capital gains tax in the US if I sell it. Will the UK Inland Revenue also expect me to pay capital gains tax on the sale? (It would seem a little unfair to have to pay twice!)
Thanks for your help.
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david ingram replies:
The property is taxable in the US and may be taxable in the UK first. If it is, the tax will be credited to you US tax by filing form 1116. This reply to a Canadian will give you a heads up.
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My_question_is: Canadian-specific
Subject: Tax on property sale in UK
Expert: [email protected]
Date: Wednesday January 24, 2007
Time: 10:25 AM -0500
QUESTION:
I hold both Canadian and British citizenship. I own property in the UK (I
have owned an apartment for about 15 years)and was wondering about the tax
situation, both in the UK and Canada, if I were to sell the property there.
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david ingram replies:
The UK is similar to Canada in terms of selling a principal residence.
I can also claim a British Passport but at 64 I am not likely to do so at
this time.
I know that if (always a non-resident) I had bought the house as an
investment, I would not owe any tax to the UK but would to Canada.
In the case of a house that you used to live in, it can be subject to UK
private residence tax relief if you lived in it before you left and can not
return because of job circumstances for either spouse.
If it is just an investment property, it is likely taxable. It does not
matter much though because the tax will be lower than the Canadian tax and
it "IS" taxable in Canada - the tax paid to the UK will be a tax credit in
Canada on lines 431 and 433 of the Canadian T1.
I suggest that you need to talk to a UK accountant or maybe the Inland
Revenue itself.
You can also find out a bit by reading
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRental
Income/DG_4020890
Do me a favour and let me know the answer if you find out.
This will be going out to another 13,000 people and someone may write back
with the answer. If so i will forward it to you.
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CEN-TA Cross Border Services - Tax, Visas, Immigration
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