UK Citizen Living in Canada

fmcevoy550

I have a friend who is moving to Canada on a 2 year travellers visa. He is a PT and, as a result, most of his income earned is through simple bank transfers in an online bank (Revolut). What way should this be treated for tax reasons when he moves to Canada, where he will inevitably continue coaching clients back in the UK? I am aware of double taxation laws between the UK & Canada, but any specifics relating to this situation would be appreciated.
Thanks!

Jeremy535897

If he is a self employed personal trainer, it all depends on whether he will cease to be UK resident for tax purposes. This is not a straightforward issue. First, he needs to look at the rules in the UK bearing in mind the dates he will be away:
https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1
https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

Second, he needs to establish whether he will become resident in Canada under Canadian domestic law, and for what years.
Third, in the light of the answers to the first two questions, he will need to look at what the UK-Canada double tax agreement says, both on the residence tie breaker, and on independent personal services.

GeordieGeorge

Does he have a visa that allows him to work in Canada?

Given the lack of research he seems to have done, it’s worth checking this out as he’ll need to show how he intends to support himself.

fmcevoy550

GeordieGeorge said:

Does he have a visa that allows him to work in Canada?

Given the lack of research he seems to have done, it’s worth checking this out as he’ll need to show how he intends to support himself.

Thanks George. Yes he does have a 2yr working VISA, so it is not a lack of research as such, just a lack of clarification as to how he needs to deal with the tax side of things. I assume he will be seeking to continue his PT business whilst working over in Canada also.

fmcevoy550

Jeremy535897 said:

If he is a self employed personal trainer, it all depends on whether he will cease to be UK resident for tax purposes. This is not a straightforward issue. First, he needs to look at the rules in the UK bearing in mind the dates he will be away:

Second, he needs to establish whether he will become resident in Canada under Canadian domestic law, and for what years.
Third, in the light of the answers to the first two questions, he will need to look at what the UK-Canada double tax agreement says, both on the residence tie breaker, and on independent personal services.

Thanks Jeremy.

Correct me if I am wrong, but the way I see it, he will fall under the 'resident abroad with income from a UK source', and so should fall liable to UK tax laws in terms of his PT earnings. If he then earns income in Canada, he should fall under Canadian tax laws for such income. Does this seem correct?

I also believe he should be classed as non-resident, following the below advice: 

'If you've never before filed a tax return in Canada, you're on a 1 or 2 year Working Holiday Visa, and you plan on staying for that amount of time and then leaving Canada, it's very likely that you should file as a non-resident for tax purposes.'

Thanks!

Jeremy535897

Not really. I cannot comment on Canada's rules, but if he remains UK resident under UK domestic law (as appears quite possible, unless he meets the third automatic overseas test, see https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3 ), and is not resident in Canada, then his worldwide income will continue to be taxable in the UK. That will include his personal training income, even if done in Canada, although if it can be argued that under Article 7 of the UK-Canada double tax agreement that his business is a "Canadian enterprise", and that he has a permanent establishment in Canada from which the business is carried on, none of it would be taxed in the UK unless he came to the UK to do it.