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QUESTION:
Hi, I am going to become one of the beneficiaries of a portfolio currently
held in trust in the UK. This portfolio is significant and contains mostly
"blue chip" investments listed on the FTSE and has good growth and income
potential.
I am a dual citizen of Canada and the UK but normally reside in Canada.
I am 60 years of age and have been forced by "downsizing" to essentially
retire and have started to receive a reduced CPP income.
I am considering taking my share of the potfolio in "kind" to provide myself
with additional income rather than liquidating and inheriting a lump sum.
I would like to know if it would be more tax advantageous to leave the
portfolio under professional management in the UK and receive the income
here in Canada, or if these UK equities can be transfered to Canada and
managed here more efficiently?
I believe that as a non resident I would be exempt from UK income tax but
that needs further investigation.
I obviously wish to avoid double taxation and am trying not to draw down on
my RRSPs for as long as possible.
Regards,
MXXXXXXXXX
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david ingram replies:
I hate to be mercenary but you should come and see me for a consultation. Because the question is interesting, I am giving you a basic answer here which I am sending out to our newsgroup who might have a different opinion.  Because most of the members are concerned with US and Canada tax matters, they might also be interested in the capital gains treatment I will spell out in the answer.
Basically, it does not matter where the money is.  You will pay Canada's tax rate if you live in Canada and Great Britain tax rates if you move back.
If you leave the money in the UK, the following will apply:
Article X of the UK / Canada Tax Treaty will tax any dividends at 15% in the UK and then you will pay the difference to  Canada on your Canadian tax return.
Article XI will tax you 10% on any interest in the UK and then you will pay the difference to Canada.
You pay the difference by reporting the gross interest or dividends as foreign income on your Schedule 4 of the Canadian Income Tax Return and then claiming credit for the UK tax on your Federal schedule 1 and your BC Schedule 428 (other numbers in other provinces.  (In the US, you would report the income on Scedule B and claim the foreign tax credit on Schedule 1116).
Capital Gains are treated differently.  Capital gains for stock traded on a Public stock exchange are NOT taxed in great britain UNLESS you were a resident in the UK for a total of fifteen years in the past AND were a resident of Great Britain ANY time in the last five years before the SALE.   These rules can be found in ARTICLE XIII, paragraphs 5 to 9 which I have reproduced here in maroon.
The whole tax convention can be found at: http://www.fin.gc.ca/treaties/UK_e.html
UK / Canada Income Tax Convention -
 ARTICLE  XIIII
5. Gains from the alienation of:
  (a) shares, other than shares quoted on an approved stock exchange, deriving their value or the greater part of their value directly or indirectly from immovable property situated in a Contracting State or from any right referred to in paragraph 4 of this Article, or
  (b) an interest in a partnership or trust the assets of which consist principally of immovable property situated in a Contracting State, of rights referred to in paragraph 4 of this Article, or of shares referred to in sub-paragraph (a) above,
may be taxed in that State.
6. The provisions of paragraph 5 of this Article shall not apply:
  (a) in the case of shares, where immediately before the alienation of the shares, the alienator owned, or the alienator and any persons related to or connected with him owned, less than 10 per cent of each class of the share capital of the company; or
  (b) in the case of an interest in a partnership or trust, where immediately before the alienation of the interest, the alienator was entitled to, or the alienator and any persons related to or connected with him were entitled to, an interest of less than 10 per cent of the income and capital of the partnership or trust.
7. For the purposes of paragraph 5 of this Article:
  (a) the term "an approved stock exchange" means a stock exchange prescribed for the purposes of the Canadian Income Tax Act or a recognised stock exchange within the meaning of the United Kingdom Corporation Tax Acts; and
  (b) the term "immovable property" does not include any property (other than rental property) in which the business of the company, partnership or trust was carried on.
8. Gains from the alienation of any property, other than that referred to in paragraphs 1, 2, 3, 4 and 5 of this Article shall be taxable only in the Contracting of which the alienator is a resident.
9. The provisions of paragraph 8 of this Article shall not affect the right of a Contracting State to tax, according to its domestic law, gains derived by an individual who is a resident of the other Contracting State from the alienation of any property, if the alienator:
  (a) is a national of the first-mentioned Contracting State or was a resident of that State for 15 years or more prior to the alienation of the property; and
  (b) was a resident of the first-mentioned Contracting State at any time during the five years immediately preceding such alienation.
I hope that this helps.  You were obviously wrong about being tax free in Great Britain. Your decision about whether or not to bring the portfolio into Canada or not should depend upon your faith in your financial advisor.  
I would like to think that I could possibly help you in that decision.
.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT,  the world needs more "lerts"
 
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
  
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