Lifecycle of a tech startup series: Obtaining a Sponsor License

Episode 10

24 February 2022

Following their seed raise in episode 7 and having secured some additional capital through an R&D repayment claim in episode 9 KNow Wear Limited have identified some overseas talent that they would like to hire to help to expand the business.

This candidate does not currently have permission to work in the UK and therefore KNow Wear Limited is considering whether it can apply for a sponsor licence from UK Visas & Immigration (“UKVI”). Obtaining a sponsor licence, will then enable the company to go on and sponsor individuals to apply for immigration permission to work in the UK.

Asides from sponsoring a worker, there may be other immigration options created by a potential new hire’s personal circumstances, such as, by virtue of them being the spouse of a British citizen or being eligible for a global talent visa; so KNow Wear Limited will also consider the individual’s circumstances before pursuing sponsorship, as it might be quicker and cheaper.

What’s required to sponsor someone?

Before KNow Wear Limited can look to sponsor a foreign worker, the company must first acquire a sponsor licence. When applying for a sponsor licence it is necessary to provide a number of documents to UKVI to help evidence that the business is genuine and trading and that it is able to perform the sponsor duties it will assume.

The documents that a start-up or new company may seek to provide to UKVI can include:

  • A bank statement for a UK bank account
  • Evidence of registration with HMRC for PAYE
  • VAT certificate
  • Employers’ Liability Insurance certificate

KNow Wear Limited will also need to provide details about its operations and what type of role it wishes to sponsor.

In addition one of the founders, or an employee, will need to undertake the role of Authorising Officer – this is the person ultimately responsible for the sponsor licence and the company’s compliance with its sponsor duties.

Once KNow Wear Limited has its sponsor licence, it will be valid for 4 years and will enable the company to sponsor individuals throughout that time.

A notable drawback of the UK’s immigration system for sponsored workers is its cost. The government fee to obtain a sponsor licence for a small company is £536; however, the fees to then sponsor an individual are significant, with application fees, Immigration Health Surcharge, Certificate of Sponsorship fee, Immigration Skills Charge and priority fees quickly adding up to a few thousand pounds for each sponsored employee. The costs can potentially be recovered from the sponsored employee, except for the Immigration Skills Charge (which is either £364 or £1,000 per year) - this must be paid for by the company.

Who can be sponsored?

Only certain types of jobs can be sponsored under the UK’s immigration system – the roles must meet a minimum skill and salary requirement. To obtain a Skilled Worker visa, the role must be at least at an A-level-equivalent skill level. The minimum salary requirement is determined by a number of factors including the employee’s age, previous immigration status and the type of role they will perform - determining what the minimum salary might be is often not a straightforward task.

Once the role is assessed as meeting the requirements, a Certificate of Sponsorship can be issued to the candidate from the sponsor licence and the candidate can then apply for immigration permission (either potentially from inside the UK or at a visa application centre outside the UK). To be issued with Skilled Worker permission, the applicant will need to satisfy an English language requirement, for example, by virtue of their nationality, by holding a degree taught in English or by passing a UKVI approved English language test.

How long does it take?

Once the required documentation is available and the sponsor licence application submitted online, UKVI may take around 8-10 weeks to process the application. A 10-day priority service is available but slots for this are difficult to secure.

Once granted a sponsor licence, the process of sponsoring an individual and obtaining permission for them may take around 1-4 weeks depending upon where their application is submitted and assuming a priority service is used.

On-going obligations and duties

As a sponsor licence holder, the company will have on-going obligations and duties that it must perform for UKVI. The duties include recordkeeping, migrant tracking and monitoring and reporting duties (for example, reporting to UKVI certain changes to the business or its sponsored workers).

A failure to meet the obligations and duties can result in enforcement action being taken the sponsor licence been downgraded or revoked. If the sponsor licence is revoked this will adversely impact the right to work of all the company’s sponsored workers.

Having taken further advice and considered the cost and on-going obligations of a sponsor licence the founders of KNow Wear Limited have decided that now is not the right time to apply for a sponsor licence; however they may reconsider this after the company’s next funding round.     

ABOUT THE AUTHOR

Robert Houchill is a senior associate in the immigration team. He has extensive experience of assisting individuals and organisations with their UK immigration and nationality matters.

Robert’s experience covers all kinds of immigration and nationality applications but with a particular emphasis on corporate immigration matters, and helping high net worth individuals.

 

Lifecycle of a tech startup series

Episode 1

Case study

Welcome to the first blog in the series on the lifecycle of a tech startup.

Read the blog

Episode 2

The basics

Last time we met the founders of a wearable tech startup, who wanted to take the next steps towards establishing their business.

Read the blog

Episode 3

Intellectual Property

As part of the incorporation process, our founders started to think about any intellectual property rights (IPRs) the business was using and ownership of the same. In this blog we shall be exploring the IP considerations founders should be considering in a bit more detail.

Read the blog

Episode 4

Preparing to raise investment

In the last instalment we talked about the ways in which the founders of KNow Wear Limited could protect the intellectual property in their business. Since then, the business has been progressing well and our founders have been working on developing a prototype.

Read the blog

Episode 5

Tech in Two Minutes/Lifecycle of a Tech Startup - Essentials for e-commerce businesses in the UK

Alex Torpey speaks about the legal notices and key points to note for online retailers and platform operators in the UK.

Listen to the podcast

Episode 6

Tax reliefs

After a brief detour to consider the essentials for e-commerce businesses in the UK in episode 5, you and the other founders are now once again focusing your efforts on raising investment.

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Episode 7

Seed raise

Having decided in episode 4 on targeting angel investors to raise £500,000 investment in the business, the founders of KNow Wear Limited researched various angel investor networks which aimed to connect startups like yours with angel investors. You applied to pitch at a couple of events and were invited by one network to interview with them in person.

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Episode 8

Employees and Consultants

Having completed the raise, you, Sarah and Chris have decided that you need more help in developing and marketing the product. You are looking to create two new roles in the business - the first is a Software Developer to support Sarah’s work and the second is a Head of Marketing.

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Episode 9

R&D tax relief

Knowledge of the UK tax system is valuable for any UK business owner, start-ups can dramatically improve their chances of success by ensuring they claim the various tax reliefs and incentives available.

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Episode 10

Obtaining a Sponsor License

Following their seed raise and having secured some additional capital through an R&D repayment claim KNow Wear Limited have identified some overseas talent that they would like to hire to help to expand the business.

Read the blog

Episode 11

Directors' Duties

As a director you owe duties to the company and in certain circumstances to the company’s shareholders, employees and creditors. Breaching these duties can lead to civil or criminal penalties and so you have asked the company’s lawyers to remind you of the duties that apply to you as a director.

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