What is the Immigration Skills Charge?

The Immigration Skills Charge (ISC) has been somewhat controversial since its introduction on 6 April 2017. The ISC is a charge payable by a sponsoring employer when they sponsor a worker under the Skilled Worker or the Global Business Mobility - Senior or Specialist Worker categories.

What are the requirements?

The ISC is paid by a sponsor each time they assign a Certificate of Sponsorship to an employee under the Skilled Worker or Specialist Worker routes for a period of sponsorship longer than six months, unless an exemption is applicable. Importantly – and unlike for example visa fees – an employer is not permitted to pass this cost onto a sponsored worker.

The exemptions are listed under regulation 4 of the Immigration Skills Charge Regulations 2017. A sponsor is exempt from paying the ISC charge if:

• a migrant worker is applying for entry clearance for a period of fewer than six months
• a migrant is switching immigration categories from the student route, or initially switched from the student route and is now extending their permission to remain in the same role with the same sponsor
• a migrant worker is applying for any of the following job occupation codes; under PhD occupation codes 2111, 2112, 2113, 2114, 2119, 2150, 2311; also 2444 (Clergy), 3441 (sports players) and 3442 (sports coaches, instructors and officials)
• a migrant worker is applying under the remaining Global Mobility Routes of Graduate Trainee, UK Expansion Worker, Secondment Worker or Service Supplier
• a migrant worker is applying to stay with the same sponsor but for example, due to a change of employment title requires a new Certificate of Sponsorship (as long as the length of stay is the same)
• a migrant was granted Tier 2 permission using a CoS assigned prior to 6 April 2017 and has continued to hold skilled worker permission and undertake a skilled role since

A new exemption was introduced on 1st January 2023. Employers that sponsor workers under the Scale-up route or EU workers under the Senior or Specialist Worker route who are covered by the UK-EU Trade and Cooperation Agreement (TCA) will now be exempt from paying the Immigration Skills Charge.

How much does the ISC cost?

The cost of the ISC varies depending on the size of the company. For a medium or large company, an amount of £1,000 is payable per year for each sponsored migrant. For a small or charitable sponsor, an amount of £364 per year is payable.

A ‘small company’ is defined under the Companies Act 2006. To fall within this definition at least two of the following must apply:

• the company employs 50 workers or less
• the company has an annual turnover of £10.2 million or less
• the total assets are worth £5.1 million or less.

It is the sponsor’s responsibility to pay the ISC and this must not be recovered from the sponsored worker. Failure to pay the charge will result in refusal of the application.

Refunds

The sponsor is entitled to a full refund if the worker’s visa application is refused, withdrawn, or if the application is successful but the worker does not commence employment.

The sponsor will receive a partial refund if the worker switches sponsors after starting work, if they leave their job before the end date on their Certificate of Sponsorship, or if they receive less time on their visa than was requested.

If the sponsor notifies UKVI that their company is now a small or charitable sponsor but paid the medium or large sponsor fee when assigning the certificate, they will also be entitled to a partial refund.

Refunds are processed automatically and usually take around 90 days to be received.

Future of the ISC?

The ISC has been a topic of hot debate for many years now. The charge was brought in after substantial government debate and subsequent recommendations from the Migration Advisory Committee (MAC) to encourage employers to invest in training and upskilling UK workers, and reduce reliance on migrant workers. Guidance at the time advised that the money raised would be used to address skilled worker shortfalls in the UK domestic labour market, but there is in fact, little evidence to suggest it has been effective in this regard.

The Migration Advisory Committee have recently called for a full review of the ISC across the entire Skilled Worker route in their Adult Social Care and Immigration report in April 2022. They highlighted that revenue generated from the ISC is going straight to the Treasury instead of directly to funding the upskilling of UK workers and commented on the illogicality of placing the ISC burden on public sector bodies when it’s essentially just moving funds across the government.

Many UK businesses, particularly small and medium enterprises, have continuously critiqued the extreme financial strain the ISC places their companies under. This is becoming an even more serious issue following the UK’s exit from the European Union and the impact this has on industries which were reliant on an EU migrant workforce. Notably, the social care sector is a major user of the Skilled Worker route, but it is currently facing an unprecedented crisis with 70,000 additional vacancies compared to before the pandemic.

Moreover, the NHS reported that an estimated £180m a year is spent on visa costs when sponsoring overseas staff which has had a drastic effect on staffing problems as well as on their ability to provide patients with a basic level of care. Against the backdrop of the cost-of-living crisis, we believe that imminent reform to the ISC regulations is inevitable. When, if or how the government propose to tackle these issues is yet to be seen…

If you require advice or assistance regarding your liability to pay the ISC, issues with obtaining a refund, or any other sponsored work queries, reach out to our specialist team on 0300 131 6767 who can assist. Alternatively, fill in the enquiry form below and we will get back to you