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Umbrella Companies and Immigration Applications
If you’re an Expat working in the UK on a temporary work visa such as the Working Holidaymaker Visa you should consider how your choice of contract solution (Umbrella Company or Limited Company) will affect any future Immigration applications, and in particular the Tier 1 (HSMP).Tier 1 is the highest level of the governments points based immigration system. Prospective applicants must score at least 75 points from 4 scoring area to qualify and must provide suitable original documentation to prove eligibility. Once approved a Tier 1 (HSMP) holder may stay and work in the UK for up to 5 years (with an extension after 2 years).
One of the most important Tier 1 scoring areas is that of ‘Previous Earnings’ where applicants score more points for higher previous earnings. Contractors who go into business with a Contractor Limited Company may find it more difficult to prove previous earnings therefore making it more difficult to secure a Tier 1 visa.
Tier 1 (HSMP) Applications and Limited Company Contractors
A Contractor Limited Company is a great option for those contractors outside IR35 as it may be possible to save large amounts of Class 1 National Insurance and in particular Class 1 Employers National Insurance. This saving is made by structuring contract income in order to minimise PAYE deductions on salaried income. This happens by setting an artificially low salary (normally £12k) and taking the remainder of contract income in the form of Dividends. As Dividends are not subject to National Insurance, savings can be made.The problem with structuring income in this way however is that it makes it more difficult to prove income received as payslips show a gross payment of around £12k. To prove total income you need to produce company accounts, which can take time and cost to prepare.
When considering Tier 1 (HSMP) applications the Border and Immigration Agency need to see proof of income, normally in the form of payslips. However, if you run a limited company only a small proportion of your overall income will be salaried income as the majority will be in the form of dividends. Therefore in order to prove income you may have to supply some of the following documents:
- Personal Tax Return
- Personal Bank Statements
- Audited Company Accounts
- Business Bank Statements
- Copies of contracts detailing the contract rate
- Copies of Invoices confirming the contract rate
- Accountants Letter
Gaining these documents and proving income could add months to the overall Tier 1 application and possibly restrict you from taking contract extensions, as the client/agent would wish to see a long term work status.
