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Redundancy and its implications

Redundancy and its implications

Old Sep 1st 2008, 9:37 pm
  #1  
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Default Redundancy and its implications

Fingers crossed me and kids are in Canada for 8 December 2008, im holding off for that date because 1 - we need visa's first and 2 - im getting made redundant from Barclays (bring it on) on Sunday 30th November.

The way it works is i will get 3 months wages (gardening leave) then my redundancy package and bonus in Feb 09, unless i hand in my notice on 1st December then i will get everything in one go on 23rd January, which is how im going to do it.

So how do i stand with this money as i receive it after i move to Canada and although the wages are taxed,the redundancy payment is tax free as its under £30k, i will though be putting the money straight into a savings account in Canada for a rainy/snowy day.

Also how do i stand with sending off the P85 to Inland Revenue as when i leave i'll will still be having more money coming to me.

Please dont tell me the Canadian Gov will tax me to the hilt .. i just want it all for myself/family.

Thanks in advance ..
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Old Sep 1st 2008, 9:46 pm
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Default Re: Redundancy and its implications

My advice would be to fly out on the 24th January! (or later.)

Your redundancy payment, although tax free in the UK would be subject to Canadian tax if you are resident in Canada at the time of receipt.
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Old Sep 1st 2008, 9:51 pm
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Default Re: Redundancy and its implications

Originally Posted by sas-lou View Post
Fingers crossed me and kids are in Canada for 8 December 2008, im holding off for that date because 1 - we need visa's first and 2 - im getting made redundant from Barclays (bring it on) on Sunday 30th November.

The way it works is i will get 3 months wages (gardening leave) then my redundancy package and bonus in Feb 09, unless i hand in my notice on 1st December then i will get everything in one go on 23rd January, which is how im going to do it.

So how do i stand with this money as i receive it after i move to Canada and although the wages are taxed,the redundancy payment is tax free as its under £30k, i will though be putting the money straight into a savings account in Canada for a rainy/snowy day.

Also how do i stand with sending off the P85 to Inland Revenue as when i leave i'll will still be having more money coming to me.

Please dont tell me the Canadian Gov will tax me to the hilt .. i just want it all for myself/family.

Thanks in advance ..
You should talk to an accountant in Canada. Payments such as these are taxable in Canada.

http://www.cra-arc.gc.ca/E/pub/tp/it365r2/it365r2-e.txt

Section 14.
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Old Sep 1st 2008, 10:20 pm
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Default Re: Redundancy and its implications

I am not waiting until Jan to leave England, i haven't seem hubby since May and i miss him like crazy (and all of his faults ), the kids and cat also miss him terribly.

Oh well .. in one hand and out the other ..

OR .. although i will have to look into it in more detail, can the Canadian Gov touch the money if i leave it in the UK (my current a/c) or maybe purchase items in canada with my UK credit card and pay off from UK current a/c, that way im being taxed on canadian good brought in canada ..

Im sure there is no way around it, but if there are any accountants on here that can tell me of somekind of loophole .. if any, i would be very grateful.
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Old Sep 1st 2008, 10:25 pm
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Default Re: Redundancy and its implications

Originally Posted by sas-lou View Post
can the Canadian Gov touch the money if i leave it in the UK (my current a/c)
Until an accountant knows your full circumstances it would all be speculation. Once you are deemed a tax resident you have a legal obligation to declare world income. If they find out about it they can certainly come after you for it, plus interest and penalties if it is found you owe tax.
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Old Sep 2nd 2008, 3:05 am
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Default Re: Redundancy and its implications

Originally Posted by sas-lou View Post
OR .. although i will have to look into it in more detail, can the Canadian Gov touch the money if i leave it in the UK (my current a/c) or maybe purchase items in canada with my UK credit card and pay off from UK current a/c, that way im being taxed on canadian good brought in canada ..

Im sure there is no way around it, but if there are any accountants on here that can tell me of somekind of loophole .. if any, i would be very grateful.
Just to reiterate what bramwith and Surrey Expat have already said, if you are tax resident in Canada when you receive the severance pay it is taxable in Canada. There is no loophole.

However, you should consider consulting an accountant because they may be able to find tax savings measures you haven't thought about. Many people in Canada pay more tax than they need to.

If you are working in Canada you and your OH will accrue RRSP contribution room. Once you have the room either you or your OH can put the money into an RRSP and you will get your tax back (maybe even more if one of you are paying at a higher rate then).
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Old Sep 2nd 2008, 1:00 pm
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Default Re: Redundancy and its implications

Thank you ever so much for your replies.

I have spoken to Inland Revenue this morning as i was number crunching during my limited sleep last night.

I was told that i will be taxed in the UK from the source so i cant hand in my P85 until January 09 and i must include my P45, she also mentioned that i shouldnt be taxed on the money in Canada and to make sure i have a copy of my P45 to prove that i have paid tax on it in the UK.

Lets hope she is right.

We'll see what happens ..

Thanks again
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Old Sep 2nd 2008, 2:49 pm
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Default Re: Redundancy and its implications

Originally Posted by sas-lou View Post
Thank you ever so much for your replies.

I have spoken to Inland Revenue this morning as i was number crunching during my limited sleep last night.

I was told that i will be taxed in the UK from the source so i cant hand in my P85 until January 09 and i must include my P45, she also mentioned that i shouldnt be taxed on the money in Canada and to make sure i have a copy of my P45 to prove that i have paid tax on it in the UK.

Lets hope she is right.

We'll see what happens ..

Thanks again
If you have paid tax on the money in the UK, you can claim a foreign tax credit on you Canadian return, so you don't pay it twice. If the Canadian tax is higher than the UK tax, you pay the difference. Keep a copy of the payslip from the company as well as the P45.
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Old Sep 3rd 2008, 2:06 pm
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Default Re: Redundancy and its implications

I believe that the redundancy pay is tax-free across the world, as the UK tax office deems it to have been covered for tax (weird accounts I know)

I WOULD STILL TALK TO A CANADIAN ACCOUNTANT ABOUT THIS...

Holiday in Canada for a month, go back to the UK, recieve your payment and then return and go through immigration, less hassle than sorting out the income thing
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Old Sep 3rd 2008, 3:32 pm
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Default Re: Redundancy and its implications

Originally Posted by bootlecat View Post
I believe that the redundancy pay is tax-free across the world, as the UK tax office deems it to have been covered for tax (weird accounts I know)
This is not right. Severance pay is taxable in Canada unless it is transferred directly to an RRSP (and the recipient has the RRSP room). See the CRA's explanation here.

I WOULD STILL TALK TO A CANADIAN ACCOUNTANT ABOUT THIS...
No argument from me here.

Holiday in Canada for a month, go back to the UK, recieve your payment and then return and go through immigration, less hassle than sorting out the income thing
Remember that residency for immigration purposes is not the same as residency for tax purposes, but you have the right idea. If the OP's OH and children (not forgetting the cat) are resident in Canada it will be difficult to argue that she has not established residential ties here if she moves in with them - even though she is in the country on a visitors visa.

It depends on the amounts involved, but the tax savings may merit a nice Christmas holiday in, say, Florida.
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