Lumpsum withdrawal of Canadian RRSP - UK capital Gain

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
jaideep211
Posts: 1
Joined: Sun Jan 20, 2019 10:36 am

Lumpsum withdrawal of Canadian RRSP - UK capital Gain

Post by jaideep211 » Sun Jan 20, 2019 10:38 am

Hi

I am a Canadian citizen living / working in Toronto, Canada. I will be permanently moving to the UK in 3 months’ time.

I have funds in Canadian RRSP (Registered Retirement Savings Plan) in Canada and I plan to withdraw those when I become a resident of the UK.

Canada and UK have Double Taxation avoidance Agreement and specifically around withdrawal of RRSP, I found the following circular from the UK govt. (DT4617)

https://www.gov.uk/hmrc-internal-manual ... ief/dt4617

The manual is adequately clear on the withholding tax of 25% levied by Canada upon withdrawal, however, I am not clear on the treatment of any capital gains in those RRSP when I file my taxes as a UK resident. My questions are as follows:

I plan to relocate permanently by March 2019 and become a UK tax resident for the purpose of filing the 2019 taxes. I have 2 options for lump sum withdrawal:

1. I continue to maintain the funds in RRSP until 2020 at which point I withdraw lump-sum. After paying 25% to Canada, I file UK tax in 2020. How are the capital gains (for UK tax) calculated? Are they calculated on the cost of purchase of assets from the beginning (Some of the RRSP assets were purchased 8-9 years earlier and therefore, may have significant taxable capital gains)? It appears that the last line of DT4617 manual specifies that “if the assets are disposed to fund withdrawal’ capital gains tax is attracted.

2. In the event, I sell the assets in the RRSP and converting them into cash while still being in Canada, and then later after moving to the UK withdraw that cash, technically speaking, assets would not be sold to fund the withdrawal. Would I then be able to not pay capital gains taxes in the UK since assets were sold while I was in Canada and not to fund the withdrawal at the time. This essentially has the impact of changing the ‘cost basis’ of those assets.

Any advice on the aforementioned will be much appreciated. If there are any specific HMRC links that address this or any tax accountants in the UK who could address this, please advise.

Thanks..!
JD

nelsona
Posts: 15525
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Lumpsum withdrawal of Canadian RRSP - UK capital Gain

Post by nelsona » Sun Jan 20, 2019 11:33 am

To take care of any accrued gains, you can either sell into cash, or swap into other investments, just before leaving. This resets any gains to zero. This is commonly done just before leaving Canada to move to countries where RSPs are not fully recognized.

This is US/Canada forum, so I'm not going to delve into UK taxation, however, be aware that if you convert to a RRIF(which you can do at any age), and withdraw 10% or less a year, you will avoid Cdn taxation altogether on these funds, as this will be considered a periodic withdrawal from your RRIF, which by the UK/Canada treaty is not taxable in Canada. Non-periodic withdrawals are indeed taxed 25% by Canada.

There are a couple of other forum members that have moved to UK with RRSPs, they may know more on how your RRSP/RRRIF withdrawal would be taxed in UK.
Nelsona Non grata. Non pro. Search previous posts.

Post Reply