Setting up a business in the United Kingdom: Challenges posed by the immigration system

For businesses or entrepreneurs looking to expand in the United Kingdom, the successful start of the business is often associated with hiring the first employee or choosing the first commercial partner. Bringing in staff or management personnel, people who are familiar with the company’s culture who possess the required expertise to grow the company is crucial to any business plan targeting expansion in the UK.

A good understanding of the current UK immigration system, in place since January 1st, 2021, is therefore essential, especially as the labour shortage affecting many sectors is preventing employers from finding the required skills amongst the local population.

Used to freedom of movement within the European Union, French and European employers tend to overlook the complexities of the British immigration system. However, obtaining a visa, a very coveted document, is the culmination of a process that requires careful preparation and forward thinking as regards the options available in order to anticipate the costs, the timelines and the short and long-term consequences.

Apart from a few limited options open to entrepreneurs with innovative projects, the newly established company requires a sponsor licence granted by the Home Office in order to obtain visas.

Setting up a company in the UK is known to be simple and fast, but obtaining a sponsor licence is more complex, especially when starting a new business. The sponsorship system is based on:

  • An employer-employee collaboration that requires the drafting of an employment contract between the sponsor and the person on a visa, even in the case of entrepreneurship.
  • Exclusive sponsorship of so-called skilled workers, meaning those who hold a job with a suitable skill level approved by the Home Office.

A sponsor licence implies that the company can compile an application package that will demonstrate the following elements to the UK authorities:

  • Ability to comply with the requirements imposed by the Home Office, including the implementation of human resources procedures that enable the monitoring of visa-holding individuals (reporting and recording duties). These requirements apply even to small entities with only one employee.
  • Designation of the authorising officer, a British employee or director or someone with residency status, who will be responsible to the Home Office for all requests made under the sponsor license.
  • Demonstration of the legal and commercial existence of the company in the UK, including opening a bank account and registering for VAT.

Finally, the company will have to justify that the identified candidate for the visa is the most suitable person to fulfil the role for which they are being recruited and meets the required conditions based on the type of visa being sought (qualifications for the position, salary level, English proficiency).

These procedures often require specialized assistance, especially for small entities with nascent commercial activity. However, with a good understanding of the rules, the costs, and the timelines prior to establishing the company, nothing is insurmountable.

Other solutions specifically dedicated to expanding an already existing activity can be considered, such as the “Expansion Worker” route. It is a starting point for small entities that allows the creation of a subsidiary in the UK and the arrival of a first employee with a certain level of seniority. Reserved for companies that do not yet have a commercial activity in the UK, this route allows for deferring certain obligations, including the designation of the authorising officer or the prior opening of a bank account. It is an option designed by the Home Office to facilitate the start-up phase for companies that can demonstrate economic and commercial maturity in their home country. However, this solution is only feasible if the parent company’s activity has been established for a minimum of at least three years.

It is all possible, but one has to know how to understand the rules, use them and cost them.

In order to successfully develop a business in the United Kingdom, one has to identify in advance all the immigration options: anticipate, understand, and comply.

Bénédicte Viort de La Batie
Associate – Browne Jacobson LLP