We have reported previously about the UK government’s intention to introduce a new Immigration Skills Charge for Tier 2 visa sponsors. The Home Office has recently published some more detail about this charge, which will apply from 6 April 2017 subject to parliamentary approval.

What is the Immigration Skills Charge?

The skills charge is an additional government charge on any UK organisation with a Tier 2 sponsor licence. It must be paid up-front when assigning a Tier 2 certificate of sponsorship on or after 6 April 2017, unless an exemption applies.

This new visa-related tax on employers will be payable in addition to Tier 2 application fees and the immigration health surcharge. The money generated by the skills charge will be used by the Department of Education to address skills gaps in the UK workforce.

How much is it?

The skills charge will be £364 per year of the visa for small or charitable sponsors and £1,000 per year of the visa for medium or large sponsors. Any sponsor that is not “small” will be required to pay £1,000 per year. Based on current information published by the Home Office, a UK business will only be deemed to be small if:

  • its annual revenue/turnover is £10.2 million or less, and
  • it has 50 employees or fewer.

We will need to wait until the final rules are published to determine whether the home office will incorporate additional elements to the test from the wider definition of a small company used to determine sponsor licence fees.

When will it apply?

The skills charge will apply to any Tier 2 General or Tier 2 ICT certificate of sponsorship assigned on or after 6 April 2017, where the Tier 2 visa applicant is applying:

  • outside the UK
  • inside the UK where the applicant is switching into Tier 2 from a different visa category, or
  • to extend a Tier 2 visa or to change employment from one Tier 2 sponsor to another, but only where the worker first entered the Tier 2 category on or after 6 April 2017.

There is an important exemption for non-European workers already sponsored in Tier 2 before 6 April 2017. Employers will not need to pay the skills charge to extend a Tier 2 visa or to sponsor a Tier 2 worker from another business, provided that the new Tier 2 visa application is submitted inside the UK. This is a welcome development to ensure that in most cases, you will not have to pay the skills charge in respect of your existing Tier 2 workers.

Are there any other exemptions?

Sponsors will be completely exempt from paying the skills charge when assigning a certificate of sponsorship for:

  • a Tier 2 worker performing a PhD level role specified by the Home Office
  • a graduate on a Tier 4 student visa switching into Tier 2 General, or
  • any family members of the Tier 2 applicant.

Anything else I need to know?

One issue that has not yet been addressed by the information published so far is whether there will be scope for refunds to sponsors where the worker either does not commence employment or leaves employment for any reason before the end of the visa period. As the skills charge is paid in advance and could be as much as £5,000 for a five year visa, we will need to wait to see what the government’s position is on this.

To the extent that you have any Tier 2 hires from overseas or transfers from your international offices planned for 2017, consider accelerating those in the next month or so in order to avoid the skills charge. Businesses will obviously need to account for these extra hiring costs in future recruitment budgets, but if you would like to review your strategic planning for these charges please do contact us.