Firstly, what is an A1/Certificate of coverage?
The usual rule is that you pay social charges (National Insurance Contributions in the UK) in the country where you work. In Europe, and elsewhere, you may be able to pay social costs back home or, sometimes, where your employer is based. To do this there must be a social security or totalization treaty in place between the work country and the country where you normally live. Within Europe, you can apply for what is called a certificate of coverage, an A1 for a period of up to two years on an employed or a self-employed basis subject to various conditions which can exempt you from having to pay social costs in the work country and allow you to pay them back home instead.
Some facts on A1s
- An A1 can only be issued from the country where an individual is tax resident;
- The individual must have paid NICs/Social Security contributions for the three months preceding a move to work abroad;
- An A1 will only be issued for up to 2 years, by any country;
- Issuing an A1 in the UK can take up to two months. The turnaround time of HMRC to reply to A1 queries is 35 days when the application is filed online. Postal correspondence may take even longer than usual. If HMRC require some further documentation the turnaround time will lengthen. The payroll cannot be run in the work country until the A1 is received, if one wishes to use the A1.
What happens if you are refused an A1?
If you are unable to get an A1 certificate, you must pay the social security contributions on your foreign income, in your work country.
When is obtaining an A1 advantageous?
Obtaining an A1 is an advantage when the social security tax rates in your country of residence are lower than the social security tax rates in the work country.
If an A1 can be obtained, the saving on National Insurance/Social Security contributions, depending upon your circumstances, is very worthwhile. At Access Tax and Accounting Limited, we will gladly assist with A1 applications in the UK.