8 March 2000 External T.I. 2000-0004695 - UK PENSION CONTRIBUTIONS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: A Canadian resident originally from the U.K. is allowed to make additional contributions to the U.K. Pension Department in order to increase the pension he will receive from the U.K. pension when he reaches 65 years of age, can he deduct these additional contributions in computing his Canadian income taxes?

Position: No.

Reasons: There is no provision in the Act that provides for a deduction.

XXXXXXXXXX 2000-000469
M. P. Sarazin
March 8, 2000

Dear Sir:

Re: Additional Contributions to a U.K. Pension Plan

This is in response to your facsimile dated January 26, 2000, wherein you requested a ruling that voluntary United Kingdom ("U.K.") National Insurance contributions made to the U.K. Pension Department to increase your U.K. pension benefit entitlements at age 65 would be deductible in computing your income in Canada.

You have been a resident of Canada since XXXXXXXXXX. You would like to make the additional contributions to the U.K. National Insurance scheme in order to increase your eventual pension entitlements under the plan. Since you have registered retirement savings plan ("RRSP") contribution room, you would like a deduction equivalent to the deduction available to you for RRSP contributions.

Comments

In your letter you have outlined what is an actual fact situation related to proposed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. Consequently, we can only provide you with the following general comments.

Contributions to a pension plan are generally deductible in computing income if the pension plan has been registered by the Canada Customs and Revenue Agency for the purposes of the Income Tax Act (the "Act"). Also, a deduction from Canadian federal income taxes otherwise payable is available for contributions made to the Canada Pension Plan. However, there is no deduction available under the Act for contributions made to a U.K. (foreign) pension plan or U.K. (foreign) government social security arrangement.

Where an individual has RRSP contribution room, the individual's contributions, up to the RRSP contribution room, to an RRSP are deductible in computing his or her income. However, there is no provision in the Act that permits a contribution to a foreign pension plan to be considered a contribution to an RRSP for purposes of the Act.

Although no deduction is available should you contribute to the U.K. National Insurance arrangement, you will be required to include in computing your income for Canadian tax purposes all amounts you receive under such a U.K. plan. This is because, as a Canadian resident, you are taxable on your world income. The Canada-U.K. Income Tax Convention (1978) does not provide any relief in this regard.

We trust the above comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch