Immigration Aspects of Opening a UK office
A NARROWING PATHWAY FOR SMALLER BUSINESSES?
On 14 May 2020, the UK Government announced changes to the Immigration Rules which will come into force on 4 June 2020. Amongst these changes are updates to the Representative of an Overseas Business category (aka the ‘Sole Representative’ visa) which continue a recent trend of making it increasingly difficult for overseas businesses to open a UK office, with small to medium sized businesses disproportionately affected.
The main immigration options for businesses hoping to open their first UK office by transferring one or more experienced staff member(s) include (1) the Sole Representative visa; (2) the Start-Up or Innovator visa; or (3) a Tier 2 sponsor licence application followed by Tier 2 work visas for each individual. We explore the basics of each category below, focusing on the issues encountered by smaller businesses trying to find a suitable immigration route into the UK.
Sole Representative Visa
This immigration category allows an overseas business to send a senior employee to the UK to establish its first UK presence. The principal changes to this visa category set to come into force on 4 June 2020 are aimed at closing existing loopholes in the current system, namely:
Expanding the current provision preventing majority shareholders applying as a sole representative to include anyone who has a majority stake in or otherwise owns or controls the overseas business, including by means of shareholding, partnership agreement, sole proprietorship or any other arrangement. Under the current rules, business entities with no shareholding (for example, an LLP) could potentially send a partner of the overseas business to act as their sole representative in the UK as they do not qualify as a ‘majority shareholder’; from 4 June 2020, this type of workaround will no longer be possible.
Preventing a majority owner of the overseas business from applying as a dependant family member of a Sole Representative. This closes a loophole which allowed a transfer of shares to a husband or wife to allow the main applicant to meet the requirement of not being a majority shareholder.
Adding other ‘genuineness’ requirements, including the requirement that the UK business is not being established solely for the purpose of facilitating the entry and stay of the applicant. The applicant must also have the necessary skills, experience and knowledge of the business to be able to undertake the role of Sole Representative, giving the Home Office further powers of discretion to decide whether the application is genuine.
While it may seem entirely legitimate for the UK Government to want to avoid exploitation of the Sole Representative category, this thought process somewhat misses the point: why is this category being exploited in the first place? To put it another way, why would legitimate business owners need to take advantage of these loopholes rather than using a more appropriate immigration category? As highlighted below, the answer is that sometimes an appropriate immigration category can be very hard to find – particularly for small to medium-sized businesses.
Start-Up & Innovator
In March 2019, the UK Government closed the Tier 1 (Entrepreneur) route to new applicants and replaced it with a much narrower route: Start-Up and Innovator. While the level of investment funds required has been lowered (no funds are required for the Start-Up route and $50k is required for the Innovator route – compared to $200k previously required), the new pre-requisite to be endorsed by a Government-approved body before applying for the visa itself has caused multiple issues.
Firstly, finding a suitable endorsing body which specialises in the applicant’s relevant field can be very difficult. There have also been reports of endorsing bodies ‘selling’ endorsements, for example incubators which require the applicant should invest thousands in their program in order to ‘prepare’ the business for endorsement. Indeed it can be a real challenge to find an endorsing body which will entertain an application without having an existing relationship with the applicant. In addition, even where a suitable endorsing body exists, first time applicants for endorsement must show that their business is innovative, viable and scalable – these requirements can be difficult to meet, especially the latter which demands evidence of potential for job creation (which may not be planned, particularly for smaller businesses).
Tier 2
In order for an overseas company to transfer an employee to the UK via Tier 2 (the main work visa category), a UK-based company must first apply to become licensed as a Tier 2 sponsor before going on to support the individual’s Tier 2 visa application. We won’t explore the requirements of obtaining a Tier 2 sponsor licence nor a Tier 2 visa in any detail here, apart from pointing out that a British or ‘settled’ employee who is permanently based in the UK is usually a pre-requisite for obtaining a Tier 2 sponsor licence. This will often require a fresh hire to be made within the UK before any overseas employees can be transferred over – this isn’t usually a problem for large businesses with substantial recruitment budgets, however for smaller businesses this requirement presents a real challenge.
Conclusion: Strategic Planning is Key
While it’s certainly not impossible to find an immigration route which allows an overseas business to open a UK office, it is true that the available options are ever-narrowing – particularly for smaller businesses. The importance of a skilled immigration lawyer who can create a tailored immigration strategy for your business’ particular circumstances cannot be overstated, as the most suitable option will be very fact sensitive and may require significant forward-planning.
If you’re thinking of expanding your business into the UK, please do get in touch with our experienced team to arrange a complimentary initial consultation. We look forward to working with you!