Principal Issues: (1) Is a UK pension paid to a Canadian resident subject to income tax? (2) What are the tax implications of not previously reporting this income? (3) How should this income be reported on previously assessed tax returns?
Position: (1) Yes, unless specifically excluded from income under the Act or the Canada-UK Income Tax Convention. (2) Interest and penalties may be assessed on the unpaid tax liability. (3) Amendments to tax returns can be made using form T1 Adjustment Request. To avoid possible penalties, the information can be reported using CRA's Voluntary Disclosure Program.
Reasons: (1) The UK pension payment made to a Canadian resident would be subject to income tax under subparagraph 56(1)(a)(i) of the Act. (2) In accordance with subsection 152(4), CRA can reassess beyond the normal reassessment period if the taxpayer has made misrepresentation. Pursuant to section 161 of the Act, interest is assessed on any unpaid liability. (3) The Voluntary Disclosure Program encourages taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA, without penalty or prosecution.
