Since all UK employers are required to have a sponsorship licence to employ migrant workers from 1 January 2021 under certain work visa routes, the Immigration Skills Charge has become payable by a greater number of businesses.
Yet the ISC is relatively unknown among employers, and given the level of the charge, can be an unwelcome surprise for employers sponsoring for the first time.
The ISC was introduced on 6 April 2017 under the Immigration Skills Charge Regulations to address the domestic skills gap.The charge is a strategic measure designed as a disincentive to employers for hiring overseas workers, with a view to making the option of investing in training and developing UK settled workers instead.
The funds raised from the ISC are directed to the Department of Education to support investment in the development of skills and training and to address the skills gap in the UK’s domestic labour market.
To help sponsors better understand the Immigration Skills Charge, and its implications on budgets and processes, we answer some frequently asked questions from employers.
When does the Immigration Skills Charge apply?
The ISC applies where an employer is hiring a skilled migrant to work in the UK for more than six months under one of the following visa routes, unless an exemption applies:
- Skilled Worker visa – this category enables employers to recruit non-EEA nationals – and after 1 January 2021 all non-UK resident workers – in qualifying roles.
- GBM Senior or Specialist Worker visa – this category enables overseas employers to transfer existing employees to UK-based operations.
If the worker has applied for their visa from within the UK, the employer must pay the charge even if the worker is applying for less than 6 months.
The ISC is also payable if the employers wish to extend the employment of a sponsored worker for a further limited period, and assigns a new Certificate of Sponsorship.
Sponsors are not liable for the ISC for any of the worker’s dependants.
Immigration Skills Charge exemptions
There are limited exemptions to the Immigration Skills Charge.
A sponsor will not be liable to pay for the Immigration Skills Charge if they are sponsoring:
- Workers switching to a Skilled Worker or Senior or Specialist Worker visa, and the exemption continues to apply if the visa is extended and the employer assigns a further CoS to the same migrant to continue in the same role.
- Skilled workers in roles with the following occupation codes:
- chemical scientists (2111)
- biological scientists and biochemists (2112)
- physical scientists (2113)
- social and humanities scientists (2114)
- natural and social science professionals not elsewhere classified (2119)
- research and development managers (2150)
- higher education teaching professionals (2311)
- clergy (2444)
- sports players (3441)
- sports coaches, instructors or officials (3442)
- Workers assigned a CoS prior to 6 April 2017
- EU national workers transferring from an EU-based business to the UK for up to 36 months under the GBM Senior or Specialist Worker route (see details below).
EU worker GBM Senior or Specialist Worker exemption
With effect from 1 January 2023, an exemption to the Immigration Skills Charge applies where an employer is sponsoring an intra-corporate transferee for no more than 36 months under the GBM Senior or Specialist Worker visa.
The exemption applies where the Certificate of Sponsorship (CoS) is issued on or after 1 January 2023, and where the worker is an EU national (or Latvian non-citizen) and is assigned to the UK from an EU business for under three years. Importantly, the exemption does not extend to EEA or Swiss nationals, ie while EU citizens are eligible, those from Iceland, Norway, Liechtenstein and Switzerland are not covered by the exemption.
Updated Home Office guidance on the Global Business Mobility route states that when issuing the CoS, the sponsor must use an ISC-exempt CoS, and confirm that the UK-EU Trade and Cooperation Agreement exemption applies, and submit details of the exemption, such as the location in the EU of the business assigning the worker to the UK, and if relevant, confirming that the worker is a Latvian non-citizen passport holder, or is entitled to one.
Scale up visa exemption
Employers are not liable for the ISC when sponsoring a worker entering the UK under the Scale Up route.
How much is the Immigration Skills Charge?
The Immigration Skills Charge is set at two levels:
- Large charge: £1000 per sponsored worker per year
- Small charge: £364 per sponsored worker per year
For a medium or large-sized business, the ISC is £1,000 per sponsored employee per year. For each additional 6 months the worker is sponsored, an additional £500 in ISC is payable. If the worker will be in the UK for longer than 6 months but less than a year, the first full 12 month period must be paid for.
For smaller businesses or charitable organisations, a lower ‘small charge’ rate of £364 applies for the first 12 months, followed by £182 for subsequent 6 month periods of employment.
The total ISC payable will depend on the size and type of sponsor on the date the CoS is assigned and the length of employment stated on the CoS.
The full charge amount will be calculated automatically using the dates provided by the employer as part of the sponsorship process.
Period of employment stated on CoS
Large charge total ISC payable
Small charge total ISC payable
|12 months or less||£1,000||£364|
|More than 12 months but no more than 18 months||£1,500||£546|
|More than 18 months but no more than 24 months||£2,000||£728|
|More than 24 months but no more than 30 months||£2,500||£910|
|More than 30 months but no more than 36 months||£3,000||£1,092|
|More than 36 months but no more than 42 months||£3,500||£1,274|
|More than 42 months but no more than 48 months||£4,000||£1,456|
|More than 48 months but no more than 54 months||£4,500||£1,638|
|More than 54 months but no more than 60 months||£5,000||£1,820|
Which fee is payable: the large charge or small charge?
Employers will need to determine whether they are classed as a small or large company, and pay the appropriate fee. Regulation 2 of the Immigration Skills Charge Regulations defines small or charitable sponsors as:
- a company subject to the small companies regime under section 381 of the Companies Act 2006(4);
- a charity within the meaning of section 1 of the Charities Act 2011(5), or section 1 of the Charities Act (Northern Ireland) 2008(6), or a body entered in the Scottish Charity Register (7); or
- a person who employs no more than 50 employees.
The Companies Act states two or more of the following must apply to be considered a small company:
- The company must have a turnover of no more than £10.2 million.
- The company must have a balance sheet total of no more than £5.1 million.
- There must be no more than 50 employees.
Companies that do not come within the criteria of a small business should pay the large charge.
Where the employer has assigned a CoS to a migrant and erroneously pays the small business or charitable organisation fee, but the large charge should apply, the Home Office will request a ‘top up’ charge to cover the difference. This will apply provided the employer notified the Home Office prior to assigning the CoS that it no longer qualified as a small or charitable organisation.
A top-up charge will also be requested in any other circumstances where the sponsor has not paid the full ISC amount.
When does the employer pay the Immigration Skills Charge?
The Immigration Skills Charge is payable each time the sponsor assigns a Certificate of Sponsorship to someone applying for a Skilled Worker or Senior or Specialist Worker visa.
The charge has to be paid before the worker’s visa application will be processed by the Home Office. The visa application will not progress until the ISC has been paid in full.
If the individual already works for you and is changing job within your organisation to a role with a different occupation code, you will need to assign a new CoS which is used to apply for a new visa. The Immigration Skills Charge must cover the full validity of the worker’s visa. As such, a new visa with a longer validity must be covered by paying additional ISC to cover the extra period of leave. This also means additional ISC will not be payable if the new CoS does not extend the time on the worker’s visa.
What happens if you don’t pay the Immigration Skills Charge?
When you assign a Certificate of Sponsorship to the worker, you must pay the ISC in full and as one payment. This is a mandatory requirement.
Failure to comply risks delaying the applicant’s visa application at the Home Office. Non-payment of the ISC will result in refusal of the application.
In the event the employer assigns a Certificate of Sponsorship but fails to pay the Immigration Skills Charge, the certificate will be rendered invalid for as long as that payment obligation remains outstanding.
The Home Office should issue a payment reminder to the sponsor for the charge. If the full charge is not settled within 10 working days of the first formal reminder, the visa application will be refused.
Can the sponsor pass on the Immigration Skills Charge to the employee?
The Home Office guidance relating to visa sponsorship states that the Immigration Skills Charge must not be passed on to the sponsored worker. The charge is payable by the employer and it should not be ‘clawed-back’ from the employee.
This requirement relates to the fundamental purpose of the ISC, which is to disincentivise employers from hiring from overseas instead of investing in improving domestic skills. If the Home Office discovers the employer has passed on the ISC to a sponsored worker, they can take enforcement action against the sponsor, including potentially revoking the sponsorship licence.
Does the Immigration Skills Charge extend to dependants?
No, the skills charge is not payable for any dependants (such as the spouse, partner or children) of sponsored workers seeking leave to remain in the UK.
Is the Immigration Skills Charge refundable?
In limited circumstances, the employer may be able to apply for a full or partial refund of the Immigration Skills Charge.
If the worker’s visa application is refused by the Home Office, or withdrawn by the applicant, they may be eligible for a refund. Similarly, if the visa application is successful but the worker does not take up the sponsored employment, a refund should be issued.
Partial refunds may also be available where the sponsored worker:
- Starts working for the employer but then changes to another sponsor, or
- Is granted less time on their visa than you sponsored them for, or
- Leaves their job with the sponsor before the end date on their Certificate of Sponsorship.
If the employer paid the higher ‘large charge’ instead of the small charge, they can be refunded the difference. And in some circumstances, after the worker’s first full year of sponsored employment, the employer may be able to apply for a refund on the ISC where there are unused periods of leave of 6 months or more.
There will be no refund payable where:
- The worker changes job but remains employed by the same sponsor.
- The worker’s leave is curtailed due to a breach of the conditions of their leave, either through their own actions or those of their sponsor.
Refunds of the ISC will be processed automatically via the Sponsorship Management System (SMS) typically:
- Within 90 days of the sponsor reporting the migrant’s change in circumstances
- Within 90 days after the expiry of a Certificate of Sponsorship that has not been used
- Within 90 days of the date of the worker’s visa application being refused or withdrawn (including any application for administrative review)
- Within 90 days of assigning the CoS if notifying you have became a small or charitable sponsor
If the refund has not been received after 90 days, the employer should contact the Home Office.
Are there any other costs involved when sponsoring a worker?
In addition to the Immigration Skills Charge, there are various other costs you will be liable for each worker you sponsor under the Tier 2 route. These include:
- Sponsorship licence application fee: for medium or large sponsors this is currently £1,476, while the fee for small or charitable sponsors is £536.
- Certificate of Sponsorship issuance fee: £199 per sponsored worker.
The visa application fee will depend on where the application is being made and whether priority services are used. Other costs to consider include relocation and legal costs and the Immigration Health Surcharge.
Fees are subject to change and you are advised to check the most recent rates at the time of making any applications.
Future of the Immigration Skills Charge
As the UK immigration rules undergo substantial reform during 2021, we are likely to see changes to the ISC under the proposed Immigration Skills Charge (Amendment) Regulations 2020.
With the regulations in draft form, and given the imminent extension of the charge to all employers hiring non-UK resident workers from 1 January 2021, the ISC has been the subject of recent parliamentary debate. In particular, the financial burden the ISC imposes on charities and smaller employers is raising concerns that many employers will be outpriced from the sponsorship regime and as such will struggle to meet their talent needs from the domestic labour market alone.
However, some have called for the ISC to be increased in certain circumstances to heighten the incentive for employers to invest in the training and upskilling of UK workers rather than simply paying the ISC as a tax on hiring from overseas.
DavidsonMorris are specialists in UK immigration, working closely with businesses to provide guidance and support with UK immigration compliance and Home Office applications such as sponsor licences and sponsored work visas. We can advise on whether you are liable to pay the Immigration Skills Charge, the amount you will need to pay and the process for settling your liability.
Taken together, all of the costs involved in sponsoring a migrant worker can be substantial, adding to the resources, skills and attention required to meet your ongoing compliance duties as a sponsor. Failure to meet these duties will put your sponsorship licence at risk of suspension or revocation – which will curtail sponsored workers’ visas and impact the organisation’s ability to sponsor migrant workers.
Contact us if you have a question about the Immigration Skills Charge.
Immigration Skills Charge FAQs
When did the immigration skills charge start?
The Immigration Skills Charge took effect on 6 April 2017.
What is the Immigration Skills Charge?
The Immigration Skills Charge is a fee payable by an employer when they sponsor workers under the Skilled Worker or the Senior or Specialist visas. The ISC must be paid when the sponsor issues the Certificate of Sponsorship. Failure to pay the ISC will result in the worker's visa application being refused.
How much is the Immigration Skills Charge
The Immigration Skills Charge costs £1000 per sponsored worker per year for large companies, or £364 per year per sponsored worker for smaller companies and charities.
Last updated: 1 January 2023