Redundancy

My company announced a proposal to close all R&D activities at my workplace, which will make four departments (including mine) redundant.   We begin a 45 day collective consultation period on Wednesday, and if all goes to plan, 30th June is our last day.

I won't know the full details until the consultation process has concluded, but I am wondering if there are any circumstances related to US tax laws that I should be aware of.   

If my role is confirmed as redundant, I would get a tax-free lump sum payment equivalent to 12 weeks' salary, plus any unused holidays (and potentially, an additional pay as per my 4 weeks notice period, where I'd be on ''Garden Leave'')

I'd just like to arm myself with as much knowledge going into this process and understand whether there will be any issues for next year's US taxes.  I am also wondering what things I might need to be aware of in terms of my company's Defined Contribution Pension program (at present, I contribute 5% and the company double-matches that amount).

Any advice/helpful hints are greatly appreciated.
Thanks in advance.

Sorry to hear of the news, and I may not be able to help all that much, but I can relate a story of an American I know who took redundancy in the UK as a means to early retirement.

They had all sorts of ex gratia payments; loss of office, additional company payments for redundancy, and the UK statutory redundancy payment. It totalled a fair sum. They talked to an IRS agent with the upshot that all the above was taxed by the US. The reasoning was a comparison to a permanent 'layoff' loss of job in the States where the company would offer incentives for those who volunteered to leave. The place to start would be questioning the US tax treatment for those who are involuntarily 'laid off' and receive payments. My guess is yes, they probably are taxed on the payments.

They were using Foreign Tax Credits (1116) and all the above was considered to be in the 'General Limitation' basket since it was employment related.

As for the pension, you really will have to wait and see what is proposed. If you're offered the chance to move the pension to an equal scheme, then my guess is no, there is no tax event for the US. If the pension is dissolved and you are paid the proceeds without an option to reinvest it elsewhere, you'll need to explore the ramifications for US tax.



 

They were using Foreign Tax Credits (1116) and all the above was considered to be in the 'General Limitation' basket since it was employment related.

As for the pension, you really will have to wait and see what is proposed.

Thanks, theOAP, I was expecting as much -- wait and see.  The paperwork I've received states that I will have to sign a Settlement Agreement, and that the company will pay 400 + VAT for an independent solicitor of my choice.  Now, if only I could find a UK-solicitor that also specialises in US tax law!