Sponsor Licence (formerly Tier 2 Sponsor licence) UK Guide (2023)

The Home Office has published new guidance for sponsor licence applications. This reflects changes made to UK immigration rules in December 2020, notably, the replacement of the Tier 2 (General) visa route for sponsored employment with the new Skilled Worker visa route. From 1 January 2021, companies must have a valid sponsor licence in order to employ all skilled workers who do not have the right to work in the UK, including EEA and Swiss nationals and their family members, if they have not been granted settled or pre-settled status under the EU Settlement Scheme.

A sponsor licence (formerly known as Tier 2 sponsor licence) allows UK-based companies to employ skilled workers who are based overseas or within the UK (applicants can “switch” into the Skilled Worker visa from most other visa types, for example Tier 4 Student and Tier 2 visas).

Once the licence is approved, it will be valid for a period of four years with the option for renewal.  

To be eligible to apply for a sponsor licence, your organisation must have a UK presence and be operating or trading lawfully in the UK. If you have multiple UK branches you may apply for one licence to cover all your linked UK entities – alternatively, you might apply for separate licences for each branch, depending on your circumstances.

If you are required to be registered with or inspected/monitored by a statutory body to operate lawfully in the UK, you will need to submit proof that you (and any branches covered by the licence) are registered with the appropriate body. You may also need to supply evidence that you hold the appropriate planning permission or local planning authority consent to run your class of business at your trading address.

The Home Office must be satisfied that you are able to offer genuine employment in a skilled occupation and that you will pay the correct rate of salary, as specified by the Home Office.

As part of your licence application, you are pledging to accept all of the duties associated with being a sponsor licence holder.

Private individuals are not normally eligible to be recognised as sponsors, but an exception applies if the individual is a sole trader who wishes to sponsor someone to work in their business.

We have an in-depth understanding of Sponsor Licence applications and are professional and results-focused. For assistance with any UK immigration law concerns, contact us. We’re here to help!

The fee for a sponsor licence depends on the size and type of organisation. This application fee is payable every time the sponsor renews their licence (every four years). Fees are usually reviewed annually by the Home Office which publishes them on its website.

Organisations classified as “medium” and “large” are required to pay a sponsor licence fee of £1,476. This fee would apply to all organisations which do not meet the definition of a “small” sponsor.

An organisation would normally qualify as a small sponsor if two of the following apply:

• your annual turnover is £10.2 million or less
• your total assets are worth £5.1 million or less
• you have 50 employees or fewer

Registered Charities are also considered to be “small” sponsors.

Organisations classified as “small” sponsors are required to pay a sponsor licence fee of £536.

If you have already been granted a ‘Worker’ sponsor licence (formerly known as Tier 2 sponsor licence) and decide to add a subcategory, there would be no fee. For example, if you hold a Skilled Worker licence (formerly Tier 2 General) and would like to start sponsoring migrants under the Intra-Company Transfer route (formerly Tier 2 Intra-Company Transfer), you’d simply need to submit an application through the Sponsor Management System to add a subcategory – no Home Office fee would apply.

Click here to know home office cost & Skilled Sponsor Licence in Details.

There are two sponsor licence ratings:

• A-rating
• B-rating

If you are successful in your sponsor licence application, you will be awarded an A-rating. This is the highest rating and is awarded by the Home Office to trusted organisations which have proved that they have the necessary systems in place to comply with sponsor duties.

A sponsor must maintain their systems and policies in order to maintain their A-rating. The Home Office may re-assess at any time and these compliance visits will determine if an organisation still meets the criteria for an A-rating.

If the Home Office finds that a business is not complying with sponsor duties, it may be downgraded to a B-rating. A B-rated sponsor will need to meet a time-limited action plan to regain their A-rating. If they cannot meet the requirements of the action plan within the specified timeframe, the licence will be revoked.

It should be noted that the Home Office can suspend/revoke a licence without taking the preliminary step of downgrading to a B-rating. The choice of action taken by the Home Office will depend on the seriousness of the breaches which have been identified.

To apply for a sponsor licence (formerly known as Tier 2 sponsor licence), a company is required to submit an application form online along with a minimum of four specified supporting documents as evidence of its trading presence in the UK, in addition to a covering letter to provide background information about the company.

Occasionally, the Home Office may require additional documents such as evidence of the company’s HR processes to assess whether the compliance requirements and sponsorship duties will be met. During an assessment of the licence application, the Home Office may also conduct a compliance visit at the company premises.

Our team can conduct a mock audit of your HR procedures prior to your formal application being made to identify any weaknesses and put in place an action plan to rectify them.

You will usually need to submit a minimum of four specified mandatory documents with the Skilled Worker (formerly Tier 2 General) licence application. The required document list is extensive and will depend on whether you are representing a public body, start-up, franchise or SME. Some easy to obtain documents may include:

1. Latest business bank statement.
2. Employer’s liability insurance of at least £5 million from an authorised insurer.
3. Certificate of VAT registration.
4. Evidence of registration as an employer with HMRC – i.e. PAYE and Accounts Office Reference Number.
5. Proof of ownership or lease of business premises or rent agreement.
6. Latest audited or unaudited accounts (audited accounts are mandatory if your company is legally obliged to file audited accounts).
7. If you are required to be registered with and/or inspected/monitored by a regulatory body to operate lawfully in the UK, evidence of your registration.

If you are applying for the Intra-Company Transfer sponsor licence subcategory, you will also be required to submit evidence of common ownership between the company in the UK and the company overseas.

There are several types of sponsor licence and each type of licence will require different supporting documents to be submitted. Our team can advise on the type you need to apply for and provide a tailored document checklist for you.

Provided the requirements are met and the correct evidence is submitted, it is possible to apply for multiple subcategories of sponsor licence at the same time.

1. Skilled Worker (formerly Tier 2 General)

The Skilled Worker route is particularly designed for migrants who have been offered a job in the UK. This is the main immigration route for skilled workers from outside the UK, and from 1 January 2021 will apply to all EEA and Swiss nationals who wish to work in the UK unless they have been granted pre-settled or settled status under the EU Settlement Scheme or hold a valid frontier worker permit or other visa that permits work in the UK.

2. Intra-company Transfer (ICT) (formerly Tier 2 Intra-company Transfer)

The ICT route is for migrants who have been offered a temporary position by their overseas organisation to work in its UK office. Unless the salary package is above £73,900, the employee must have been employed by the company for at least 12 months.

The proposed migrant will be subject to specific requirements in relation to their salary package in order to qualify under the ICT route. The maximum total stay permitted under this route is five years (in any six-year period) unless the salary package is above £73,900. The route does not lead to settlement as opposed to the Skilled Worker visa route. The job must be at RQF level 6 or above (graduate level).

It may also be possible to sponsor an overseas employee under the Intra-company Graduate Trainee route. This route is designed for individuals who are being transferred to the UK as part of a graduate training programme for a managerial or specialist role. The trainee must have been employed by the overseas company for at least three months before the date of application and the UK salary package must be at least £23,000 per annum.

3. Sportsperson

Professional sportspersons and qualified coaches cannot be sponsored under the Skilled Worker route and must be sponsored under the separate Sportsperson visa (T2) route.

4. Ministers of Religion

This licence is for those who have received a job offer within a faith community such as a minister of a religion or a missionary. Unless the role is in a senior position within the organisation, it must be a pastoral role (involving primarily pastoral duties). Roles such as teaching, media production or administration, within a faith organisation, may not qualify for sponsorship under the Minister of Religion route and the organisation may need to apply for a Skilled Worker licence instead.

A Certificate of sponsorship (CoS) is an electronic document generated on the Sponsor Management System (SMS) after a licence is granted.

In order to sponsor a migrant worker, the company must first request a Certificate of sponsorship from the Home Office through the SMS. Once this is granted, the company will need to assign it to the migrant worker they intend to sponsor to generate a unique reference number for the candidate to submit during their visa application.

Under new sponsor licence rules, the Home Office has rebranded its previous two types of CoS depending on the immigration status of the migrant worker:

Defined CoS

These certificates are required for those who are based outside the UK and making an entry clearance application as a Skilled Worker.

Once you have identified a person you want to sponsor, you can apply for this on the SMS, and the Home Office usually aims to decide within one working day unless additional information is required. This is judged on a case-by-case basis.

Previously, sponsors were required to submit their request for a restricted CoS (now defined CoS) by the 5th of each month to receive a decision by the 11th of the same month.

The overall cap on the number of defined CoS the Home Office can grant annually has also now been abolished.

Note: Those who are in the UK as visitors will not be able to apply for a Skilled Worker visa within the UK and will need to return to their country of residence for submission. Therefore, they will require a defined CoS.

Undefined CoS

The annual allocation of undefined CoS runs from 6 April to 5 April each year. A sponsor can request multiple undefined CoS before the deadline on 5 April if they foresee a need to extend the leave of an existing employee or have identified someone they wish to sponsor who requires an undefined CoS (for example, someone “switching” visa category). If a sponsor is able to justify the need for the request, then the CoS will be granted from 6 April.

If you missed the deadline for renewal or require additional undefined CoS during the year, you may request an increase of allocation on the SMS. Again, you will be required to prove you genuinely need the CoS requested. The processing time for an increase of allocation is 18 weeks, however, priority service is available at an additional cost of £200.

Once an organisation acquires a sponsor licence, they become registered with the Home Office as a sponsor and can begin to issue Certificates of sponsorship (CoS) to skilled non-UK staff subject to meeting the requirements.

For many companies, being able to hire overseas skilled talent is essential to the successful operation and growth of their business. This is particularly so with the end of freedom of movement following the UK’s departure from the EU, meaning that a significant portion of the UK workforce would require sponsorship from January 2021 if they failed to secure their status in the UK before the deadline.

At A Y & J Solicitors, we have extensive experience of helping companies acquire and maintain their Skilled Worker sponsor licences.

Unless there was an error in the Home Office’s assessment of the application, a six-month cooling-off period would be triggered from the date of the refusal, meaning that another licence application cannot be submitted until the end of that period.

In some cases, if we believe there has been a mistake in the decision to refuse your application, we may submit a pre-licence error correction on your behalf. However, if the decision was not overturned after the pre-licence error correction, the only other option to challenge the decision would be to lodge a judicial review.

Our team can expertly advise and represent you in challenging a decision of sponsor licence refusal.

There are some circumstances where you may be prevented from applying or re-applying for a sponsor licence for a certain period of time, known as a ‘cooling off’ period.

Whether or not this applies will depend on the reasons for refusal and the length of a cooling off period will vary depending on the circumstances.

For example, if your application was refused because you were unable to submit requested information or documentation within a specified timeline (for reasons out of your control) you may be able to reapply without waiting.

In most cases, if a sponsor licence application you have submitted is refused, a six-month cooling off period will apply.

There are some circumstances where it may be longer. For example, if you have been issued with a civil penalty for employing an illegal worker, it would be 12 months from the date you paid the penalty in full. If you tried to reapply during this time, your application would automatically be refused.

Even if you have never applied for a sponsor licence before, it is very important to check if your business may be subject to a cooling off period before submitting an application for a sponsor licence.

To obtain a sponsor licence, UK employers need to follow the below steps:

• Check your business is eligible, i.e. can you provide the specified documents to show your company is genuine and actively trading in the UK?
• Choose the type of licence you need.
• Decide who will manage sponsorship within your business. This person is also known as the Authorising Officer. Usually, this person is the most senior person responsible for recruitment within the company, which can be a company director or an HR manager. Upon the grant of the licence, the Authorising Officer will be responsible for overseeing the SMS and ensuring the sponsorship duties are complied with. You will also need to appoint a level 1 user. This is the person with access to the SMS (sponsor management system) and does not necessarily need to be the Authorising Officer. This person will be responsible for reporting any changes within your organisation as well as requesting and assigning CoS to migrant workers on the SMS. The first level 1 user must be an employee or an office holder of the organisation. However, once the licence is granted, the level 1 user will be able to request for additional level 1 users such as legal representatives to be added.
• Apply online and pay the fee. The application fees differ depending on the size of your organisation as defined under the Companies Act 2006. If you are a charitable or small organisation, the sponsor licence application fee is £536. If you are a medium or large organisation, the fee is £1476.

It will be valid for four years with the option for renewal at the end of the fourth year. However, if the Home Office has any reason to believe that you did not comply with your sponsorship duties, your licence may be suspended or revoked.

The standard processing time for applications is 8 weeks. During the processing time, the Home Office may conduct a compliance visit at your office to ensure you are complying with your sponsorship duties.

Your application may be refused if you failed to demonstrate all sponsorship duties are complied with during the visit.
Before the submission of your application, our team may conduct a compliance audit for your HR system to ensure these duties are complied with and advise on any adjustments if needed.

Your application can be refused by the Home Office for a number of reasons. Some of the most common are:

• Failure to pass the Home Office’s Compliance Audit
• The business does not have appropriate policy and procedure in place to meet its sponsorship duties
• The business does not pass its ‘genuineness test’
• Failure to retain sufficient documentation on migrant workers
• The business has not responded to Home Office enquiries on time

This is not an exhaustive list. If your licence application was refused for reasons not listed above, we would require a copy of your decision letter to advise whether it is a challengeable decision.

Unless the person has another form of visa that allows them to work, such as those with a PBS dependant visa or a spouse visa, you are not permitted to the employ a non-settled worker without a sponsorship licence.

If you employ any illegal worker, you may face potential civil penalties as well as criminal convictions.

Each licenced company receives a unique sponsor licence number which can be found on the decision letter confirming the grant of the licence. This number can also be found on the licence summary page on the SMS.

• The granting of a licence requires sponsors to act in accordance with immigration rules and the UK legal system.
• A sponsor should keep in mind that sponsorship is a privilege, not a right. The Home Office will never licence organisations whose actions and behaviours tend to obstruct the public good.

The Home Office will take appropriate compliance actions if the existing sponsor is found engaging with behaviours non-conducive to the public good. The compliance action will depend on the gravity of actions or behaviour.