Changes to sponsor guidance suggest that self-sponsorship is coming under increasing levels of scrutiny from the Home Office.
When applying for a sponsor licence, a business is usually required to demonstrate that they are “operating or trading lawfully in the UK”. Until now, the meaning of this phrase “operating or trading” has not been defined. What is required to show that a business is “operating or trading lawfully in the UK” has therefore been left to the interpretation of applicant businesses and their legal advisers, leading to uncertainty and inconsistent evidential standards being applied.
However, the Home Office have now defined these terms in their sponsor guidance glossary. The updated glossary states as follows:
Broadly, ‘trading’ can be taken to refer to operations of a commercial kind by which the trader provides to customers for reward some kind of goods or services.
‘Operating’ includes the activities of both:
- charities and other not-for-profit organisations where they are providing a service to clients, customers or service users
- businesses who are engaged in pre-trade activities with a view to commencing commercial trading activity (as defined above) in the foreseeable future
The glossary also refers to two examples, found elsewhere in the guidance, where a business will not be considered to be operating or trading.
The first of these is where there is “no significant trade activity” – meaning where there is no evidence of financial transactions taking place between the organisation and customers, clients or other service users, and where the organisation is being financed through a related company or private investors, rather than trading activity.
The second of these deals with “circular trading” – where any business income is mainly from services provided to other entities which are linked by common ownership or control, indicating a lack of genuine trading activity.
It is these examples, rather than the definition itself, which may be a cause for concern for prospective sponsor licence applicants. While “operating or trading” was previously quite a nebulous concept, these examples make clear that if a business is not already receiving trading income for its services, then it is unlikely to qualify for a sponsor licence.
While self-sponsorship – the process of setting up a business in order to sponsor oneself for a visa – has been under scrutiny from the Home Office for some time, the examples given make the Home Office’s stance on this particularly clear. An individual who sets up a UK business and funds this through their own finances or via other corporate entities is unlikely to clear the “operating or trading” bar. Therefore, anyone looking to self-sponsor will need to first have in place a business that is generating a trading income. In some circumstances, the Expansion Worker or Innovator Founder routes may be better options.
But even where a business is generating a trading income, self-sponsorship remains high risk, as highlighted by the new mandatory revocation ground at paragraph (oo) of Annex C1 to the sponsor guidance on sponsor duties and compliance. This states that the Home will revoke a sponsor licence where they have reasonable grounds to consider or suspect that the business has been established or exists mainly to facilitate the entry or residence of a worker who would not otherwise have the relevant permission to work in the UK. This covers self-sponsorship but would also cover circumstances where an individual sets up a business to sponsor family or friends.
While these changes provide additional clarity on the requirements for obtaining a sponsor licence, they also indicate the Home Office’s increasingly tough stance on self-sponsorship. If you need help identifying the best visa route for you, your business, or your family, please get in touch at [email protected]
