What is an A1 form?
An A1 NI exemption allows you to to exempt from paying National Insurance (known as NIS) in Norway and allows you to pay NI in the UK instead. This exemption has to be applied for via the UK HMRC and when granted is automatically valid in Norway. You are not able to claim NIS exemption in Norway until you have this form, but the claim can be backdated on presentation of the paperwork.
The form is normally valid for 1 year only, but can easily be extended for a second year. We have seen awards of up to five years, although these are quite unusual.
If you want us to apply for an A1, we will need your personal details and your National Insurance number as well your UK PAYE registration details.
To qualify for an A1 form (it used to be called an E101) the employer must be seconded by his employer to work in Norway (or any EEA country). This normally means that you have been working with the company for some time, and have been sent to work on a specific contract in Norway and you want to maintain your payment history in the UK, or don’t see why you should contribute to Norway for a short period when you will get no benefit for the payments.
The problems that potentially arise are if you have been recruited specifically for the contract in Norway and join the company without any previous employment/contracting history with them, or if you are working through your own company and your company has not been registered for PAYE previously.
In those circumstances obtaining an A1 can be very difficult, but not impossible, and care needs to be taken in completing and submitting the application forms to maximise the chance of being approved. Backdating the PAYE registration of your company and backdating the A1 application can also increase the chance of an application being rejected.
You must be aware that the application may not be successful, as it is at the discretion of HMRC, and your employer/contractor cannot demand that you must obtain an A1 exemption form.
What is the cash benefit of an A1 NI exemption?
There can be potential savings if you have an A1 NI exemption form, but these are complex to compute and vary from case to case. In the UK, the NI is computed weekly whilst in Norway it is computed monthly and reconciled annually. This makes having a straight comparison very difficult, as you could be paying NI in the UK, whilst incurring no liability in Norway (or vice verse) depending on your employment history.
In the UK the NI rates for 2014/15 are as follows:
|Over £663 and up to £3488||12%||n/a|
In Norway the NI rates for calendar 2015 are as follows:
- If your annual income is below 49,650kr, no NIS is due and NIS for employees is also capped at 25% of the excess of the income over 49,650 if that exceeds 8.2% of the total. Therefore if you were in Norway and earned a huge bonus you would pay a large amount of employees NI on the earnings that month, but would some refunded when the tax settlements are issued in October of the following tax year – unlike the UK. There are no upper limits on how much you pay.
Break-even point with an A1 NI exemption
Assuming you are in Norway for a full year, compared to the UK for a full year, if you earn less than £2,093 or more than £4,343 then you will pay more employees NI in Norway, and obviously there is more employers NI payable.
Naturally, we can do all of this for you behind the scenes, but it involves the following steps:
- Registration in Norway
- PAYE registration in the UK
- Obtaining online filing passwords
- Application for A1 exemption (online)
- Application to operate double tax relief for Norwegian tax against UK PAYE – so you pay no UK PAYE
- Run a Norwegian payroll for tax and NI
- Run a UK payroll for no tax and NI in the UK
- On receipt of an A1, rerun both countries for the year to date:
- Pay tax only in Norway (and reclaim NI paid against future tax bills)
- Pay NI only in the UK on the same income
- Report Norwegian tax offset against UK PAYE via the payroll system, so that no UK PAYE tax liability arises
And can I reclaim the Norwegian NIS?
Once you have paid into the system in Norway it is gone, but you will be eligible for all the benefits that a Norwegian national would have, such as sickness, unemployment, maternity and paternity allowances subject to the normal conditions. In addition, after a couple of years, depending on the exact level of your income, you will start to accrue substantial pension benefits in the Norwegian system which will be paid to you automatically on retirement.
You can still contribute to the UK system by making voluntary contributions of NIC, entitling you to two pensions, and this can be worth considering.
A final comment
Your Norwegian income will be taxable in the UK as foreign earned income, and Norwegian NIS cannot under any circumstances be offset against the UK income tax liability. HMRC are very keen on this, and will often ask to see the final tax settlement to agree your UK tax liability. The NIS will be deducted from the total tax paid, and only the net amount of tax will be deductible.
Put crudely, if you earn more than about £70,000-80,000 a year, any tax refund from Norway will be claimed by HMRC.