# HMRC reporting funds in a Canadian RRSP/RRIF



## Stargazer

Do you all know much about UK reporting funds? I think I have a good strategy to get our RRSP out of Canada at the lowest tax rates possible for the 3 countries involved (Canada, UK, US). But I believe the UK may tax it at higher rates if the funds within it are considered "non-reporting funds." I don't have to worry about any PFIC rules for the US in an RRSP so not limited that way. But would like to make sure I am following all UK rules before choosing new funds.


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## Bevdeforges

Don't know anything about the Canadian and UK tax rules, but make sure you track the total tax effects of moving the funds. I was looking into transferring my US IRA funds to France to put into the standard retirement investment here and when running the numbers all the way out to when I might need the funds in retirement, it turned out that the money was, indeed, being double taxed. Seemed a better deal to leave the funds where they were and just pay the US taxes as they came due (because then the funds were exempt from French taxes). Wasn't apparent at first, but only on looking at the long term situation.
Cheers,
Bev


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## Stargazer

Bevdeforges said:


> Don't know anything about the Canadian and UK tax rules, but make sure you track the total tax effects of moving the funds. I was looking into transferring my US IRA funds to France to put into the standard retirement investment here and when running the numbers all the way out to when I might need the funds in retirement, it turned out that the money was, indeed, being double taxed. Seemed a better deal to leave the funds where they were and just pay the US taxes as they came due (because then the funds were exempt from French taxes). Wasn't apparent at first, but only on looking at the long term situation.
> Cheers,
> Bev


Thanks Bev! The RRSP is a lot like an IRA. I believe now is the best time tax-wise to change it to an RRIF for 3 reasons:

1. Canada will let us take periodic payments as UK residents at 0% tax rate! If we were doing the same thing as US residents, it would be 15%. Taking a lump sum comes with a 25% tax rate.

2. The UK does not see the RRIF as tax-deferred. They therefore tax the income and gains within the RRIF, but not the withdrawals. However, there is a capital gains exemption which we will not exceed, so might not have to pay anything to the UK either. But if we have HMRC non-reporting funds in there and they realize that, could be a problem.

3. As US citizens withdrawing from an RRIF, the IRS will want to tax it too. However, they will only tax growth, not contributions, after becoming non-resident from Canada. If I have enough foreign tax credits, this could cover that tax due, but even if not, it won't be nearly as much as it would be 20 years from now. 

Therefore, the longer it sits there, the higher tax we might face from the UK and the US, and then Canada too if we are back in the US by the time we withdraw. We plan to put it into Roths, which are not taxed in the US or the UK. So it seems like this strategy could save money, especially with the lower investment fees in the US.


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## BBCWatcher

The Roth advantage only matters if you need those particular RRSP funds to fund Roth contributions. If you're able to make Roth contributions whether or not you tap those particular funds, then your Roths are going to happen anyway and you don't "double count" that tax benefit. Make sense?

This maneuver probably also assumes that you're unlikely to return to Canada. Is that true?


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## Stargazer

BBCWatcher said:


> The Roth advantage only matters if you need those particular RRSP funds to fund Roth contributions. If you're able to make Roth contributions whether or not you tap those particular funds, then your Roths are going to happen anyway and you don't "double count" that tax benefit. Make sense?
> 
> This maneuver probably also assumes that you're unlikely to return to Canada. Is that true?


Yes, if we we were going to fund Roths anyway, it might be different, however, there are still a lot of reasons to move an RRSP out of Canada after we leave. We are unlikely to return. 

The plan is to do the employer sponsored UK pension as a first line of retirement savings. It is proected by the treaty against PFIC and foreign trust rules, also the UK government tops it up 20% with tax relief. And then move our current Roths in the US and gradually our RRSPs into Roths at Charles Schwab UK. 

The RRSPs have to come out sometime. Better now at these great tax rates and while I am alive and well enough to deal with the complexities.


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## BBCWatcher

Stargazer said:


> The RRSPs have to come out sometime.


Well, in your estate perhaps.


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