What Is The Immigration Skills Charge

For businesses looking to hire new staff from overseas, it is essential to have a good understanding of the rules regarding immigration applications. One aspect of the UK’s immigration policy that employers must understand is the Immigration Skills Charge (ISC), which was introduced in April 2017.

The ISC imposes a financial levy on UK employers who hire non-UK nationals under specific visa routes, and businesses need to fully understand when the charge is payable when developing their hiring strategies. This blog post will explore the ISC in detail, covering its purpose, how it works, and who it affects.

What Is the Immigration Skills Charge?

The Immigration Skills Charge is a levy imposed on UK employers who sponsor non-UK nationals under the Skilled Worker (previously Tier 2 (General)) and Global Business Mobility (GBM, previously the Tier 2 Intra-Company Transfer/ICT) visa routes. The change was implemented to encourage employers to invest in training the resident workforce and reduce reliance on migrant labour.

The revenue generated from the Immigration Skills Charge (ISC) is used by the Department of Education for their skills budget; it was hoped that additional skills funding would make it easier for employers to find the talent they need within the UK.

Immigration Skills Charge Regulations

The ISC applies to UK employers who sponsor non-UK workers under the Skilled Worker and Global Business Mobility visa routes. The charge applies to each worker sponsored, unless the worker qualifies for an exemption. 

When an employer decides to sponsor a non-UK worker, they must factor in the ISC as part of the overall cost of hiring and sponsoring the individual. The amount an employer must pay varies depending on the size of the business and the duration of the worker's stay in the UK:

• Medium or large sponsors: the charge is set at £1,000 per worker for each year of the visa. For instance, if a medium or large company sponsors a worker for a three-year visa, the total ISC payable would be £3,000.
• Small businesses and charities: a reduced rate is available for organisations classed as a small or charitable sponsor. These organisations are required to pay £364 per worker for each year of sponsorship. For example, a small business sponsoring a worker for a three-year period would incur an ISC of £1,092 in total.

An organisation can benefit from the lower ISC payment if they are a registered charity or if at least two of the following apply to them:

• Annual turnover is £10.2 million or less
• Total assets are worth £5.1 million or less
• You have 50 employees or fewer

The ISC must be paid at the time the Certificate of Sponsorship is assigned to the worker via the Sponsorship Management System. Failure to pay the ISC can result in the worker’s visa application being refused or delayed, impacting the worker’s ability to commence their sponsored role.

As mentioned above, the charge applies to those being sponsored as Skilled Workers or Global Business Mobility migrants; it applies to those who received their Certificate of Sponsorship on or after 6 April 2017.

The ISC represents a significant consideration for businesses when planning to hire internationally, and understanding its application and impact is essential for effective workforce planning and financial management.

Exemptions From The ISC

Immigration Skills Charge exemptions apply in certain circumstances. They are designed to ease the financial burden on specific types of workers and employment and support the flow of critical skills into the UK. These exemptions recognise the unique contributions of certain workers and the strategic importance of their roles:

• PhD-level occupations: employers sponsoring workers for certain roles requiring a PhD are exempt from paying the ISC. This exemption acknowledges the specialised skills and advanced knowledge that PhD-level workers bring, which are often critical to research, innovation, and high-tech industries. By waiving the ISC for these roles, the government aims to attract top talent to bolster the UK’s position as a global leader in research and development. The positions exempt from payment of the ISC are:

• Students switching to a Skilled Worker visa: international students who switch from a Student visa to a Skilled Worker visa are exempt from the ISC. This policy aims to retain talent that has already invested in education within the UK. By exempting UK graduates from the ISC, the government encourages them to remain in the country and contribute to the economy, leveraging their newly acquired skills and knowledge to meet domestic labour market needs.
• Sponsorship of less than 6 months: those seeking entry clearance for less than 6 months will be exempt from the ISC
• Assigning a further CoS to an existing sponsored worker: as long as the new CoS has the same (or earlier) date than on the previous CoS assigned for which the ISC was paid, the further CoS won’t be subject to a further ISC charge
• Clergy, sports players and sports coaches: are exempt from the ISC
• Held Tier 2/Skilled Worker permission continuously since before 6 April 2017: those that received their initial sponsorship prior to the introduction of the ISC will be exempt

Employers should fully understand the exemptions in order to effectively manage their recruitment strategies. 

Should you sponsor a worker on the Global Business Mobility: Senior or Specialist Worker route, you will be exempt from ISC in the following instances:

• They are a national of an EU country or hold a Latvian non-citizen passport
• They normally work in the EU for your EU business but have been temporarily transferred to work in the UK
• The end date of the temporary transfer, as specified on the Certificate of Sponsorship, is no more than 36 months after the start date
• They were assigned a Certificate of Sponsorship on or after 1 January 2023

This exemption facilitates the seamless movement of key personnel within multinational companies, ensuring that businesses can efficiently deploy expertise where it is needed most without the additional financial burden. It supports business continuity and operational efficiency for large corporations with EU offices who are facing mobility implications as a result of Brexit.

Who Can Get a Refund For ISC?

In certain circumstances, a business may receive a full or partial refund for the ISC relating to sponsorship of an overseas worker. It can take up to 90 days for the Home Office to process the refund. In the following situations, you may qualify for a refund:

• The CoS isn’t used to support an application for entry clearance or permission to remain
• The company has informed the Home Office that the worker never commenced employment
• The ISC payment was made in error
• The worker’s visa application was refused or withdrawn
• A worker is granted less time on their visa than they’ve been sponsored for
• The worker leaves the employment with the sponsor before the end date on their Certificate of Sponsorship 

A refund will not be issued where:

• The worker changes roles but remains employed with the sponsor