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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4075
Experience:  FCCA FCMA CGMA ACIS
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If I have pension savings (RRSPs) in Canada. If I withdraw

Customer Question

If I have pension savings (RRSP's) in Canada. If I withdraw the funds I will be taxed at 25% by the Canada Revenue Agency (CRA). I think HMRC will not tax me again as they have an agreement in place with CRA. But if they did would they HRMC view this as a capital gain or income? I think the capital gain exceptions is around £10k. As a 40% tax payer I then plan to contribute the funds into a UK SIPP and recover the my 40% UK tax. Is this permitted? Is there a pitfall in this plan?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Before I can move forward with your question I need to know exactly what scheme by name is XXXXX XXXXX Ie 'Snooks and Co Pension Plan' or something like that.
Customer: replied 3 years ago.
Scotia RRSP with Scotiabank
Customer: replied 3 years ago.
RRSP is a Registered Retirement Savings Plan in Canada. It is like a SIPP the fund grows free of tax and you get a tax break on contributions.
Expert:  bigduckontax replied 3 years ago.

However, further investigation reveals very bad news from The Telegraph web information site [edited] viz:

 

'Once you are UK resident, any withdrawal made from the RRSP will be taxable and must be declared in the UK. The 15 per cent [you say 25%] Canadian tax withheld at source would not be available for you to offset against the UK liability. This is because the Canadian tax withheld is on the lump sum withdrawn, but the UK charge arises as a result of the disposal of the underlying assets.

 

A credit for foreign tax will only be given by the UK if the foreign tax incurred is on the same source, which it is not.'

 

The only good bit of news is that your fund is a Qualifying Recognised Overseas Pension Scheme (QROPS).

As a 40% taxpayer it looks as though you are going to be hammered again and at least 50% of your Canadian pension post will disappear into the tax man's sticky fingers. I know Benjamin Franklin said that in life there are but two certainties, death and taxes, but this is really nasty. I would be inclined to seek advice in writing from your tax office as to the actual position before making a move in this matter, although I don't hold out much hope of a favourable conclusion. Sorry to be the bearer of such sad tidings. Please don't shoot the messenger!

Customer: replied 3 years ago.
Thanks very much for the assistance. David
Expert:  bigduckontax replied 3 years ago.
Thank you David, pleased to be of assistance.

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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.
Expert:  bigduckontax replied 3 years ago.
And a bonus, brings the support up to the excellent level!