Lump sum withdrawal from Canadian RRSP

UK tax implications of lump sum withdrawal from Canadian Registered Retirement Savings Plan ('RRSP')

Didn't find your answer?

Hello, does anyone have experience of looking at the UK tax implications of a lump sum withdrawal from a Canadian RRSP? My client has, during the 2016/17 tax year, withdrawn the balance of her funds from her Canadian RRSP.  She is UK tax resident.  She suffered 25% WHT in Canada on the withdrawal of funds and transfer to the UK.  The HMRC manuals at "DT4605 Canada: Notes" explain that this lump sum withdrawal would not be taxable in the UK, and my research supports that but I'd appreciate the views of others.  I am aware that tax is paid in the UK on disposal of assets within the fund, and I'm aware that the 25% WHT cannot be set off against the gains on disposal of assets within the fund. 

many thanks

Replies (13)

Please login or register to join the discussion.

Northumberland flag
By MJShone
06th Nov 2017 17:24

Try HMRC's Double Tax Relief Manual at DT4605:
https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt4605
Specifically the very last section in that para:

"Where a UK resident makes a lump sum withdrawal from an RRSP or an RRIF, Canada imposes a 25 per cent withholding tax. No tax credit relief is allowable in the United Kingdom in respect of the tax withheld, however, because the Canadian tax is imposed upon the lump sum withdrawal (which does not itself give rise to a tax charge in the United Kingdom), whereas any UK tax charge is on the disposal of assets held within the Plan or Fund to enable the lump sum to be withdrawn (and no tax is levied on the disposal of fund assets in Canada). The Elimination of Double Taxation Article (Article 21) obliges the United Kingdom to give credit for Canadian tax paid only against UK tax computed by reference to the same profits, income or chargeable gains by reference to which the Canadian tax is computed. Since no UK tax is computed by reference to the subject of Canadian tax (that is, the withdrawal), no tax credit relief is allowable. Similarly, where the disposal of fund assets to facilitate a withdrawal gives rise to a UK tax charge, no tax credit relief is allowable since the disposal does not attract a tax charge in Canada."

Thanks (1)
By cathyne
08th May 2021 15:22

Can I ask, how did you treat this withdrawal. I have an almost identical situation.

Thanks (0)
Replying to cathyne:
avatar
By Hugo Fair
08th May 2021 17:16

After 3 1/2 years it's usually better to open a new question ... but what, within the full answer given to the earlier OP, wasn't clear?

Thanks (2)
Replying to Hugo Fair:
avatar
By Tax Dragon
08th May 2021 17:36
Thanks (0)
Replying to Tax Dragon:
avatar
By Hugo Fair
08th May 2021 17:52

... where Dugimmon kindly directed her to the previous post - which she has now high-jacked in order to repeat her question.
If that makes sense (either logically or as an improved means of eliciting an answer to an unclear question), then I must need to take a break because it reeks to me of circularity as in ever decreasing circles of progress.

Thanks (2)
Replying to Hugo Fair:
avatar
By Tax Dragon
08th May 2021 18:37

You and your ever decreasing circles. (I've had to look the expression up and had Richard Briers staring at me from the screen before I found the underlying meaning.) Anyway I think you've lapped me, because I agree the appropriate question is the one you asked: what, within the full answer given to the earlier OP, wasn't clear? Can cathyne expand on the perceived issue?

Thanks (0)
By cathyne
10th May 2021 19:14

Measure twice. Cut once

Thanks (0)
Replying to cathyne:
avatar
By Hugo Fair
10th May 2021 20:01

Only applicable IF you've decided what you're trying to make.

Hard to see relevance to situation where you repeat a question that's already been answered (on the same thread), without saying what aspect of the answer fails to address your question.

Thanks (2)
avatar
By Helenrs
11th May 2021 16:20

Cathyne, do you still need help with this?! I didn't treat it as taxable and added an explanatory note in the 16/17 tax return.

Thanks (1)
Replying to Helenrs:
By cathyne
12th May 2021 14:37

Helenrs. Thanks very much. This is just what I was hoping to hear- ever cautious!

Thanks (1)
Replying to Helenrs:
avatar
By charelsthe3rd
07th Feb 2024 22:52

I'm interested in whether you had any problems with this. If I understand correctly lump sums are treated as disposition of assets in the UK but as income in Canada. I was under the impression that both countries would take their amounts with the CDN tax value able to be used as a credit against the UK taxes owing ( but not for more than that value irrespective of what was paid in Canada). Is this correct or were you able to find a work around? Thank you

Thanks (0)
Replying to charelsthe3rd:
avatar
By Helenrs
26th Feb 2024 09:27

Hi, I am still, frustratingly, awaiting more details of the specifics of the scheme from Canada, which I think will have a bearing on the technical analysis. thanks

Thanks (0)
avatar
By charelsthe3rd
07th Feb 2024 23:59

There is an upsate where lump sums , created prior to the change in 2017, should be treated without the extra taxation but it is unclear if anyone has challenged this.

Thanks (0)