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Contractor Limited Companies and UK Immigration

Each year thousands of freelance contractors from Australia, South Africa and New Zealand travel to the UK on temporary work visas such as the Working Holidaymaker Visa (WHV). Many have aspirations of one day transferring to long term UK work visas such as a Tier 1 (HSMP) or Work Permit. If you are one of these individuals you need to consider how the contracting solution you use while on the WHV is going to effect future immigration applications.

If you plan to apply for the Tier 1 (HSMP) you should be aware that running a limited company and taking dividends may not be the best option for you.

Tier 1 (HSMP) Applications

The Tier 1 (HSMP) is a points based visa. Those wishing to apply need to score a minimum 75 points from 5 scoring areas including:

Age
Educational Qualifications
UK Degree Level or Professional Level Qualification
Previous Earnings
UK Work Experience

Freelance contractors running limited companies find it difficult to prove previous earnings. The reason for this is due to the income structuring involved with a limited company.

If you run a limited company you normally take a low salary (normally between £5-12k per annum), business expenses and the remainder of income as dividends. By taking dividends you avoid paying large amounts of class 1 National Insurance on salaried income. In terms of retention a limited company can be a great option for freelance contractors outside IR35 (but is not so good for Australian nationals due to ATO treatment of UK dividends), however if you intend to apply for an HSMP setting an artificially low salary could cause you major headaches.

When considering Tier 1 (HSMP) applications the Home Office need to see proof of income, normally in the form of payslips. For freelance contractors with limited companies this causes problems as salaried income is only around £5-12k per annum. In order to prove previous earnings you would normally have to gain company accounts showing profit distribution. This is likely to mean higher legal fees, hassle, and delay in the overall Tier 1 (HSMP) application period.

What structure should I use if I intend to apply for a Tier 1 (HSMP)?

If you intend to apply for a Tier 1 (HSMP) you should usually use an umbrella company solution while contracting if you want to maximise your chances of a successful visa application. At Commonwealth Contractors we have specifically tailored Expat Advantage to meet the needs of Expat contractors working in the UK. With Expat Advantage everything is done for you, all you have to worry about is sending timesheets and expenses. You also benefit from a great retention rate as it may be possible to claim relocation expenses such as flights (not usually claimable under a Contractor Limited company) and accommodation as well as day to day site based expenses. However the most important thing about the solution is that you get payslips proving your actual income (the employer may also be able to provide a letter to back up the Tier 1 (HSMP) application).

To find out more about Limited Companies or Umbrella Companies call Commonwealth Contractors now on 0800 294 4388 or submit your details and we will get right back to you.

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