A Guide to UK Sponsor Licence Application for Start-Ups

Table of Contents

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1. Defining a UK Start-Up for Sponsor Licence

Criteria for being considered a start-up when applying for a sponsor licence.

2. Importance of Sponsor Licences

Why start-ups should consider obtaining sponsor licences, particularly post-Brexit.

3. Types of Sponsor Licences Suitable for Start-Ups

Description of 'Worker' and 'Temporary Worker' licence categories and their relevance to start-ups.

4. Documentation for Sponsor Licence Application

A detailed list of mandatory and optional documents required for the application.

5. Roles and Responsibilities of Key Personnel

Explanation of the roles like Authorising Officer, Key Contact, and Level 1 and 2 Users in the sponsorship process.

6. Sponsor Licence Application Process

Steps involved in applying for a sponsor licence, including assessing recruitment needs and submitting an online application.

7. Verifying Job Authenticity

Criteria for proving the legitimacy of jobs offered to international specialists.

8. Costs Involved in Obtaining a Sponsor Licence

Breakdown of various fees associated with the sponsor licence process.

9. Duties After Receiving a Sponsor Licence

Responsibilities of start-ups after acquiring the licence, including record-keeping and reporting.

10. Sponsor Licence Renewal

Details about the renewal process, including the submission through SMS and Home Office review.

11. Assistance from Tech Nomads

Information on how Tech Nomads can help in the process.

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As a start-up in the UK, your growth strategy might involve recruiting specialist workers from overseas. To hire global talents, the Home Office requires UK businesses to obtain a sponsor licence. This licence allows sponsoring skilled worker visa applicants under the Tier 2 and Tier 5 visa categories. After obtaining the sponsor licence, start-ups can hire the necessary international talent and grow their businesses.

This guide quips start-ups and their founders with the tools and instructions needed to successfully obtain a sponsor licence in the UK.

Before discussing the eligibility and requirements for obtaining a sponsor licence for start-ups in the UK, it's essential to define what constitutes a start-up in this context and understand why such businesses might need a sponsor licence.

What Business Qualifies as a UK Start-Up When Applying for a Sponsor Licence

It is not a surprise that a start-up is a new, emerging business. Usually, such an organisation has a fast-paced environment, focusing on rapid growth and scaling. It is common for start-ups to have a global market outlook; hence, they are often interested in sponsoring licences and working with foreign employees. To apply for the licence, the Home Office laid down a specific definition for the start-up: a business operating or trading in the UK for less than 18 months on the date they apply for the sponsor licence.

Note: The Home Office doesn't define a start-up business based on how many people it employs, how much money it makes, or whether the person running the company has successfully managed other businesses in the UK before.

Why Should UK Start-Ups Be Interested in Sponsor Licence

Brexit, as you might expect, is the first and foremost reason emerging businesses in the UK should get interested in obtaining sponsor licences. The aftermath of leaving the EU, combined with the pandemic, led to the most severe labour shortage in the UK since the 1990s. This shortage has made it difficult for young businesses to find talents to hire domestically. By obtaining a sponsor licence, start-ups can fill this gap by hiring skilled foreign workers.

Moreover, a sponsor licence gives young businesses a strategic advantage in the market. The licence enables start-ups to access a global talent pool, attracting diverse perspectives and skills critical for innovation and growth. The start-ups enhancing their workforce with foreign professionals enjoy the flexibility and advantage to address immediate and future talent needs.

What Type of Sponsor Licence Would Work Best for UK Start-Ups

There are two primary categories: ‘Workers’ for skilled, long-term or permanent roles, and ‘Temporary workers’ for specific, short-term positions. For most start-ups, the ‘Worker’ licence is the preferable option, as it aligns more closely with their typical hiring needs.

The ‘Worker’ licence caters to a range of roles, allowing start-ups to bring in skilled professionals essential for their growth and development. This category includes several subdivisions:

• Skilled Worker: Ideal for roles that meet the job suitability requirements set by UK authorities. This is particularly relevant for start-ups looking to fill specific skilled positions on a long-term or permanent basis.
• Senior or Specialist Worker Visa (Global Business Mobility): This is suited for established employees of multinational companies who are transferring to the UK branch. It might be a great fit for start-ups that are part of a global company or have overseas operations.

Although there are more subdivisions of 'Workers' licence type, the Skilled Worker and Senior or Specialist Worker Visa are the most suitable for young organisations.

Additionally, focusing on the ‘Worker’ licence allows start-ups to tap into a wider pool of global talent, crucial for businesses in their growth phase. This licence type not only offers the flexibility to hire skilled workers from abroad but also aligns with the long-term strategic goals of a start-up, which often include scaling up rapidly and integrating diverse skill sets into their workforce.

In contrast, the ‘Temporary Worker’ licence is more suited for short-term, specific needs and may not align with the typical growth trajectory of a start-up.

Mandatory Documents:

‍When applying for a sponsor licence, UK start-ups must provide a range of documents to the Home Office. Only four documents are required. However, consider providing as many relevant documents as possible to strengthen the application.

UK Company Registration Documents

To obtain a UK sponsorship licence, startups must demonstrate UK Company Registration Documents and eligibility  through:

1. Establishment within the UK: Your start-up needs to be legally established within the UK, and be registered with Companies House. While there's no set period for how long your business should have been operational, you must have at least one UK resident on your payroll who will interact with the Home Office on sponsorship matters.
2. UK-Based Operations: The core activities of your business must be conducted within the UK. Applications from entities primarily operating outside of the UK are not considered. Start-ups functioning remotely or through virtual offices can qualify, provided they substantiate their UK-based operations and their capability to uphold sponsorship commitments.
3. Robust Human Resources Management: It's essential to have an effective human resources management system to handle your duties as a sponsor. This includes being prepared for inspections by the Home Office both before and after the licence is granted to ensure adherence to regulations.
4. Trustworthy Management and Staff: Individuals associated with the business, such as owners, directors, and staff, should have a clean record, particularly free from immigration or criminal offences like fraud and money laundering. This is to ensure they are dependable in fulfilling sponsorship responsibilities.

Newly established start-ups are eligible to apply for a sponsor licence, but those in operation for less than 18 months need to provide additional documentation, such as a corporate bank account with a UK bank.

Bank Account Evidence

Every start-up must show proof of a UK bank account registered with the Financial Conduct Authority and the Prudential Regulation Authority. Acceptable documents include a letter from the bank detailing the business operations or recent bank statements.

Personnel Requirements

When you're applying for a UK sponsorship licence as a start-up, you need to appoint some key people in your company to handle specific responsibilities. These people are known as 'Key Personnel', and they should manage your sponsorship duties.

Here's a simple breakdown of what you need to know:

Roles of Key Personnel

There are four main roles:

• Authorising Officer: This is a senior person in charge of hiring migrants and making sure your company meets all sponsorship responsibilities.
• Key Contact: This person will be the main point of contact with the authorities about your licence.
• Level 1 User: They handle day-to-day tasks using the Sponsorship Management System (SMS).
• Level 2 User: They have fewer permissions than Level 1 Users but can still do important tasks in the SMS.

Only Level 1 and Level 2 Users can use the SMS. If the Authorising Officer or Key Contact needs access, they should also be set up as Level 1 or Level 2 Users.

The Key Personnel should generally be your employees or directors. However, there are exceptions like using an employee from a third-party organisation for HR functions or having a UK-based representative.

Location and Background Checks

Your Key Personnel should mostly be based in the UK and must not have any serious criminal convictions. There are some exceptions for overseas Authorising Officers, especially if you're applying under the UK Expansion Worker route.

1. Restrictions: There are certain people who can't be Key Personnel, like non-UK-based representatives, specific project contractors, or someone facing legal restrictions like bankruptcy.
2. Application Details: When you apply for your licence, you need to name your Authorising Officer, Key Contact, and Level 1 User. You can add more Level 1 and Level 2 Users later.
3. Ongoing Responsibilities: Always keep the contact details for your Key Personnel up to date and make sure they comply with all the requirements. If there's a change in your Key Personnel, you need to update this information.
4. Background Checks by Authorities: The authorities will conduct checks on your Key Personnel, especially when you apply for the licence or make changes to these roles. They'll look for things like criminal records or immigration-related offences.

Additional Documents:

• VAT Registration Certificate: Issued by HM Revenue & Customs (HMRC).
• PAYE and Accounts Office Reference Number: A letter from HMRC confirming these details is needed.
• Employer’s Liability Insurance: A cover of at least £5 million from an FCA-authorised insurer.
• Lease for Business Premises: If applicable, the lease agreement for where the business operates.

Other Optional but Helpful Documents:

• Financial Accounts: Latest audited or unaudited accounts, prepared by an accredited accountant.
• Company Tax Return (CT600 and CT603): The most recent tax return submitted to HMRC.
• Franchise Agreement: For franchise businesses, a signed agreement is required.
• Food Business Registration: For those in the food industry, evidence of registration or approval from a food authority, including alcohol service licences if applicable.

Industry-Specific Documents:

Start-ups in regulated industries, like financial services or healthcare, may need additional sector-specific documentation. This could include regulatory body registration or inspection reports.

Additional Considerations:

While start-ups may not have the full suite of traditional documents due to their short trading history, the Home Office offers some flexibility in documentation.

Start-ups should also provide any evidence of listings on stock exchanges, registration with HMRC, financial reports, and any other relevant business documents.

Sponsor Licence Application Process for Start-Ups

The sponsor licence application process for start-ups involves 5 stages:

1. Assess Recruitment Needs: Determine if your hiring needs can be met within the UK or if recruiting from overseas is necessary, especially in the context of the UK's general skills shortage or specific needs in science or technology. Note that Irish citizens, EU nationals with settled or pre-settled status, and those with appropriate visas or indefinite leave to remain do not require sponsorship.
2. Verify Job Criteria for Skilled Worker Visa: Ensure the roles you wish to recruit to meet the skilled worker visa criteria. Jobs must be listed on the government's occupational classification code list and meet minimum salary and skill level requirements. Sponsorship Licence lawyers can help assess if your roles align with these criteria.
3. Optimise Systems and Appoint Key Personnel: Review and potentially upgrade your HR procedures and systems to meet Home Office requirements. For start-ups, aligning your systems with Home Office standards is crucial for efficient management of skilled worker visa holders. Sponsorship Licence lawyers can assist with internal audits, training, and sponsor licence management services.
4. Submit Online Application: Apply online with the appropriate fee and correct paperwork specific to your business.
5. Post-Approval Actions: Once granted, your sponsor licence is valid for four years. You can then allocate certificates of sponsorship to overseas recruits. These recruits must then apply for their skilled worker visa to start their sponsored employment with your business.

Note that after submitting the application for sponsor licence online, you must send any supporting documents within 5 days.

Confirming Job Authenticity

Start-ups in the UK applying for a sponsor licence must prove the legitimacy of the job they offer to an international specialist. To confirm the job authenticity, the start-ups should elaborate on the following points:

1. Relevance to Occupation Demand: The job should be in an occupation that is in demand, as listed on the official government shortage occupation list.
2. Alignment with Business Needs: The qualifications of the international worker must be suitable for your start-up's scale and requirements. It's important to demonstrate a real need for hiring an international specialist for a specific role that fits your start-up's operational scope. The candidate should also meet the job's specific requirements.
3. Candidate’s Background Matching Job Requirements: If you have already chosen a candidate, their previous work experience or education should correspond to the job's demands.

Your start-up must adhere to these criteria not only during the application process but also throughout the licence's validity period. Home Office compliance officers might conduct visits post-licence issuance to check continuous compliance. Any deviation from these obligations or actions that undermine immigration control may lead to the licence being revoked.

In certain cases, UK Skilled Worker visa applicants may face further scrutiny to verify job authenticity. The Home Office might request additional evidence from the international worker within 28 days or ask them to attend a face-to-face interview. In this interview, the focus will be on:

• The relevance of the applicant's education and work history to the job.
• The applicant's knowledge about the UK company extending the offer.
• The terms of the applicant's proposed employment in the UK.

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While such in-depth checks are not always standard, the UK Visas and Immigration (UKVI) pays special attention to sectors it considers high-risk. However, the specific sectors deemed high-risk are not clearly defined in the Home Office caseworker guidelines.

Costs Involved in Sponsor Licence for Start-Ups

Sponsor Licence Fee: This is the first expense for start-ups planning to recruit internationally. The fee depends on your company's size. Small businesses or charities pay £536, while medium or large companies are charged £1,476.

Certificate of Sponsorship (CoS) Fee: A CoS, a digital document describing the job and the future employee, is needed for each worker you sponsor. For each CoS, start-ups will incur a cost of £199.

Immigration Skills Charge (ISC): Aimed at boosting local workforce training, the ISC's cost varies based on your start-up's size and the length of employment. Small companies and charities are charged £364 for the first year and £182 for each additional 6-month period. In contrast, medium and large businesses pay £1,000 initially and £500 for every subsequent 6-month period.

Start-Up Duties After Receiving Sponsor Licence

After receiving a sponsor licence, start-ups must fulfil several responsibilities. The Home Office expects such companies to ensure their foreign employees adhere to their visa terms, including working in the job for which they were sponsored and reporting changes in their circumstances. Start-ups must be ready for regular Home Office monitoring, which includes:

Record Keeping and Reporting:

Start-ups are required to keep and update detailed records of their sponsored employees. This includes information like contact details, addresses, passport copies, records of absences, biometric residence permits (BRPs), employment contracts, and National Insurance numbers.

It's also crucial to report certain changes via the Sponsor Management System (SMS) to UK Visas and Immigration (UKVI). These changes might be within the start-up, like a change in ownership, or related to sponsorship, such as a sponsored employee no longer working.

Right-to-Work Checks and Documentation:

Conducting right-to-work checks is mandatory to verify that all employees are legally allowed to work in the UK. Start-ups should keep copies of relevant documents, such as passports and visas, and regularly ensure these are up to date.

Compliance Visits and Licence Validity:

The Home Office conducts compliance visits, which can be either announced or unannounced, to verify that start-ups are meeting their obligations as sponsors. These visits are crucial to confirm adherence to immigration regulations and proper record maintenance.

Ongoing Audit from Home Office:

The Home Office also performs ongoing audits to monitor sponsor compliance. These audits are critical as they not only evaluate current adherence to regulations but also help identify areas where start-ups may need further guidance or improvements to maintain compliance standards.

Sponsor Licence Renewal

UK businesses with a sponsor licence must manage their licence renewal, as these licences do not renew automatically. It's essential to apply for renewal before the current licence expires to ensure the ongoing validity of sponsored workers' visas.

Renewal Application Process:

1. Submission through SMS: Businesses must use the Sponsor Management System (SMS) to submit their renewal requests. The fee, which varies based on the size of the company, is payable at this point.
2. Data Verification: It's crucial to confirm that all details in the SMS are up-to-date. This includes accurate information about SMS users (Authorising Officer and Level 1/2 Users), new company sites, and employee details. Incorrect information could lead to the refusal of the renewal.
3. Sending the Submission Sheet: After applying, a submission sheet generated by the SMS needs to be completed, signed, and sent to the Sponsor Licensing Unit.

Post-Submission Review by the Home Office:

The Home Office will review four years' worth of information and documentation, focusing on:

• Adherence to eligibility criteria and sponsor licence guidelines.
• Review of HR systems, staff, and procedures for managing foreign workers.
• Examination of issued certificates of sponsorship.

Possible Additional Documentation:

The Home Office may request further documents, which should be provided within five days to prevent risks like application refusal, licence revocation, or reduced certificate of sponsorship allocation.

Streamlined Renewal Process:

For organisations with at least two successful past renewals and no compliance concerns, a streamlined process may be available. This process typically excludes extensive checks like company and insolvency checks, reviews of certificate of sponsorship usage, licence structure, visit history, outstanding change requests, and risk profile, as well as checks on accreditation, registration, and other trading aspects. It also might skip compliance visit referrals.

Preparation for Compliance Visits:

If a startup has not been inspected in the last four years, it should expect a Home Office visit before the renewal is approved. It's important to ensure that the licence and SMS are fully updated before applying for renewal.

How Tech Nomads Can Help

Seeking assistance in your sponsor licence application as a start-up?

Tech Nomads is ready to assist you in sponsor licence application and further renewal processes.

To explore your options of hiring foreign employees, you may:

• Book a FREE 30-minute consultation with a Tech Nomads Global Mobility Expert;
• Read guides and articles on the Tech Nomads Blog.

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