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CGT when leaving the UK

Client leaving the UK and becoming resident in Canada

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Hi all

I'm hoping someone may have some knowledge on the Canadian tax system to help with this query. 

My client is planning on leaving the UK. This will be a permanent move. 

He has shares that he holds in an unquoted trading company, owning 33.3%. The remaining shareholders are planning to buy him out. 

If this buy out occurs after he leaves the UK (please assume it goes ahead as a simple share purchase between the shareholders rather than a company buy-back) subject to him satisfying the SRT as a non-resident, he will not be charged UK capital gains tax. This will remain the case as he has no intention of returning and therefore being a temporary non-resident. 

My research into the Canadian tax position implies that on arrival in Canada, the Canadian tax authorities operate a deemed disposition system on immigration to their country i.e. they consider you to have sold the property (including shares) you own and to have immediately reacquired them at a cost equal to their fair market value (FMV) on the date of immigration.

The FMV will then become the base cost of the asset to use in calculation of the gain or loss from disposing of the shares in the future. If the sale occurs soon after arrival in Canada, on this basis there will likely be no capital gain arising. 

This seems to good to be true, so I am sure that I must be missing something fundamental here?

Any help would be appreciated.

Many thanks

TC

 

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