Letter from HMRC about overseas assets

[Deleted User]

Jeremy535897 said:

Whilst there is no "saving clause" in the UK Canada double tax agreement, the point is that as a UK domiciled and resident individual, the retired family member is liable to UK tax on worldwide income and gains, as I said above. Canada can still tax certain Canadian source income at a relatively low rate (up to 15% on dividends, 10% on interest), which is presumably why you say tax has been paid in Canada. Credit is given in the UK for the Canadian tax paid. See Articles 10, 11 and 21:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/496655/canada1978-dta2014-consol_-_in_force.pdf

I hope you don’t mind me clarifying the point but it is important to note that relief for foreign tax paid is restricted to the UK tax ON THAT INCOME. For example, if the Canadian tax on £1000 dividend is £150, the relief available will £150 or the UK tax (£75) whichever is the lower. Many believe that simply paying £150 UK tax in this instance is sufficient to offset the whole £150.

https://www.gov.uk/government/publications/calculating-foreign-tax-credit-relief-on-income-hs263-self-assessment-helpsheet/relief-for-foreign-tax-paid-2020-hs263

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

Whilst there is no "saving clause" in the UK Canada double tax agreement, the point is that as a UK domiciled and resident individual, the retired family member is liable to UK tax on worldwide income and gains, as I said above. Canada can still tax certain Canadian source income at a relatively low rate (up to 15% on dividends, 10% on interest), which is presumably why you say tax has been paid in Canada. Credit is given in the UK for the Canadian tax paid. See Articles 10, 11 and 21:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/496655/canada1978-dta2014-consol_-_in_force.pdf

I hope you don’t mind me clarifying the point but it is important to note that relief for foreign tax paid is restricted to the UK tax ON THAT INCOME. For example, if the Canadian tax on £1000 dividend is £150, the relief available will £150 or the UK tax (£75) whichever is the lower. Many believe that simply paying £150 UK tax in this instance is sufficient to offset the whole £150.

https://www.gov.uk/government/publications/calculating-foreign-tax-credit-relief-on-income-hs263-self-assessment-helpsheet/relief-for-foreign-tax-paid-2020-hs263

Yes indeed. In this case it's only likely to be an issue where the Canadian income is only partly taxable because of personal allowance availability. For example, if Canadian income is £2,000 and bears Canadian tax of £300, but £900 personal allowance is available, the UK tax liability is £1,100 at 20% = £220 less £1,100 at 15% credit = £165 leaving £55 due.

macman

How about some context: what is the current gross annual income from this investment?