'Social Security' (NI) exemption query

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OrangeBlossom
Posts: 44
Joined: Tue Dec 30, 2014 12:03 am
Location: Tavira, Algarve, Portugal

Getting a POrtable document A1 in the UK

Post by OrangeBlossom »

Dear all,

can I follow up on Teba 18's query earlier this year and ask whether any of you recent applicants for an A1 who have applied using a CA8421 have now received your A1?

It took me ages to find out where to even request it in the UK as the info on the eu websites was wrong and the uk phone number and departments referred to no longer extant.

I posted an email query from one of the sites I looked at and it took them 5 months to reply. they also said I needed CA8421 but they did not tell me where I could find it. Like Teba18 I did not think they'd referred me to the correct form.

In Portugal, I declared an intention to start a tax activity in Jan 15 and originally my Portuguese accountant said I had a year to get the A1. But my tax activity did not start until August. I then read online that all EU citizens have an automatic exemption from needing one for the first year and I assume this means from the time of first earning any money there. My accountant now tells me we have till next October to get the A1 (though I didn't quite understand his reasoning).

The email from hmrc also told me something else rather unpleasant which I queried but they confirmed as follows:

>although you are employed in the UK and pay National >Insurance contributions as an employee if you are receiving an >income as a self-employed person in Portugal this would >include income from renting out property you would still need >to pay contributions in the UK on the additional revenue.
>The EU regulations allow you to remain subject to UK >legislation by obtaining an A1 however we are then confirming >to the Portugese that you are subject and paying the relevant >NI taxes in the UK.

As it has been such a faff to get the form and as I am intending to cease full time work in the UK at some point in the coming tax year I am wondering whether it wouldn't be simpler (and cheaper) to just pay the NI in Portugal. I asked the accountant and he said it would be about €14 a month if I earned €10,000 (which I am unlikely to do) and just over €2 a month for the amount I actually earned since August.

Does anyone know whether paying the social security in Portugal would mean that they would consider me tax resident in Portugal, even though I am not living there permanently? If so, that would be a problem if I want to apply for Non-habitual Resident status later, right?

For any of you who have received an A1, have you been informed of having to pay additional NI contributions in the UK?
Any advice on this would be much appreciated.
teba18
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Post by teba18 »

Hi OrangeBlossom. We applied for the A1 form at the beginning of December, expecting it to take several months before we had any response. Hey presto, the form arrived in mid January which we thought was an absolute miracle! It came with a letter saying that if our profits were above the EEA Small Profits Threshold we'd have to register to pay Class 2 National Insurance which is £2.80 a week. I've no idea what the SPT is but as we make a loss, we haven't done anything about registering.

I don't know about an exemption until October - we were told we needed to provide the A1 as soon as we could to avoid finding we'd been automatically registered for NI contributions in Portugal. I think it's worth double - and triple! - checking the figure you've been quoted by your accountant as we were told it was nearer 150 euros per month and other people we know have been told the same.
I've no idea about tax residency if you pay Portuguese NI.

As we're hoping to sell when we can but have decided to honour the bookings we have for this year, we're now finding out about all the hoops you have to jump through if you want to cease your 'business activity' and de-register which we would do later this year if we haven't found a buyer. What fun!
OrangeBlossom
Posts: 44
Joined: Tue Dec 30, 2014 12:03 am
Location: Tavira, Algarve, Portugal

Post by OrangeBlossom »

Thanks for the clarification Teba18. I will double check about the rate; given what you were told about that, it's definitely worth going through the hassle of getting the A1, just in case. The info about the automatic exemption for a year is definitely correct because I've seen it on an EU website, so I've got till August for sure and I won't rely on the October date I was told.

Sorry to hear you've decided to sell. I'm making a loss too at the moment but hoping that things will pick up now I've got good reviews etc.
teba18
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Location: Algarve
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Post by teba18 »

I've also noticed - which I missed until now - that the A1 is only valid until the end of this year (no idea why as not likely to retire or stop paying NI in UK for another few years) so any others who've managed to get hold of one might want to check that.
Have to admit I'm quite fascinated that there hasn't been more interest in this thread - and in all the contortions we have to perform in general to run a holiday let in Portugal. It was so simple when we first bought the place!
Sam V
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Location: Villa in Gale, Algarve, Portugal. At home in Fetcham, Surrey, UK
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Post by Sam V »

I'm here, trying to get my head around all thus.

We are UK resident. My husband is full time employed, I'm a 'housewife' and only this week cancelled being self employed on the advice of out UK accountant, I used to run a little business which was never liable for tax but registered self employed anyway and paid my NI which I apparently didn't have to do! So now I've cancelled. We submit our villa accounts to him but we just break even with a minimal profit we pay tax on. It was about £80 this year!

In Portugal our accountant has set up our local lodging activity and leaves me baffled, I usually ask advice of my manager first! The best I've learned so far, at my suggestion to him, is that as we are both PT fiscal registered we should both be paying any tax generated over the 10k€ allowance, not just me! I have no idea about the A1 situation, uneless I've misunderstood my PT accountant on what he has registered us for.
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OrangeBlossom
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Joined: Tue Dec 30, 2014 12:03 am
Location: Tavira, Algarve, Portugal

Post by OrangeBlossom »

It's true that in the UK if you don't make over a certain amount, you don't need to pay NI if you're self-employed. Some people want to because if you pay you count as having been employed for pension purposes.

The €10k allowance is about whether you need to pay VAT, i.e. think, not anything to do with the AI or social security.

I haven't made any profit yet but my understanding is that I have to register for fiscal activity in Portugal, and pay SSecurity payments after the first year, if I don't obtain an A1. I pay portuguese tax on 15% of the turnover (not the profits). i,e. this past year I will owe the portuguese taxman €100 even though I made no profit.

I also have to declare my Portuguese income to HMRC because I am UK tax resident and domiciled.They calculate on profit only, but in order to benefit from the Furnished Holiday Letting allowances, I have to have had my Portuguese flat available for rent for 207 days of the year and it has to have actually been rented out for 170 days of the year. I haven't achieved anywhere near that yet, but you can have some kind of an 'allowance' for your first year, I believe.
Once my uk tax liability is calculated, if I owe anything, any money I have already paid the Portuguese will be deducted from what I owe HMRC.

A1 aside, one thing I am still unclear about is how I will deal with the fact that the fiscal years start at different points in the two countries.
RichardHenshall
Posts: 414
Joined: Sat Sep 05, 2009 4:06 pm
Location: Luz, Algarve

Post by RichardHenshall »

OrangeBlossom wrote:... I haven't made any profit yet but my understanding is that I have to register for fiscal activity in Portugal, and pay SSecurity payments after the first year, if I don't obtain an A1. ...
AFAIK, you were supposed to register your activity before you started it (or maybe you have and I'm misinterpreting your comment). I read somewhere (but can't recall exactly where) that the PT social security payments from year 2 are based on the taxable income (ie 15% of turnover) and that there is a threshold below which no payments are due anyway. I've got an A1 but haven't worked out who to give it to yet as I don't use Portuguese accountants etc. A job for my next visit. :(
OrangeBlossom wrote:... A1 aside, one thing I am still unclear about is how I will deal with the fact that the fiscal years start at different points in the two countries.
In my experience all the income/sales fall in the 'same' year (ie between 6 April and 31 December) and since the expenditure only matters to the UK tax computation I take that for the UK year (6 April to 5 April). It may not be right but over time it will even out.
OrangeBlossom
Posts: 44
Joined: Tue Dec 30, 2014 12:03 am
Location: Tavira, Algarve, Portugal

Post by OrangeBlossom »

HI Richard,
you were supposed to register your activity before you started it (or maybe you have and I'm misinterpreting your comment).
Sorry, I was talking about my understanding of my duties overall and made it sound as though I was talking about things I hadn't done yet. I did indeed declare my intention to start an activity in PT in Jan 15 but by the time I got my AL license it was April and I didn't get any clients till August. Thanks for pointing that out though, in case I hadn't realised.

I've also already declared my yr 1 losses to HMRC because I discovered that I can't bring them forward for use next year if I hadn't declared them this year.

I can't help with who you are supposed to present the A1 to, I guess you are in the Luz in the west not the one near Tavira, so no good my recommending my accountant to you. Unlike comments I've seen on here, mine is very reasonable, price wise.
teba18
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Location: Algarve
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Post by teba18 »

I think the form has to go wherever your local Social Security office is - at least that's where we were told our property manager would take ours.
teba18
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Post by teba18 »

Our understanding is that under the !0,000 euro threshold - which we definitely won't exceed - NI payments aren't due, but we were told the tax authorities were asking for A1 forms from everyone in any case - anything to make life just that little bit more difficult!
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