Friday 28 February 2025

The UK continues to be an attractive destination for entrepreneurs from overseas looking to set up in business and for overseas businesses wishing to expand. But how accessible are the options available now to entrepreneurs and overseas businesses? The UK immigration routes change frequently, and it can be hard for entrepreneurs and businesses to keep up.

We will look at some of the options previously available and consider how these have changed and developed into the routes available today and whether the current options effectively facilitate business coming to the UK.

Previously available routes

The Tier 1 (Entrepreneur) visa required applicants to have £200,000 of their own funds or £50,000 from an FCA-regulated venture capitalist firm for investment in a UK business.  Applicants needed a business plan and had to pass a genuineness test to prove their intent and ability to establish or run a business. The Home Office assessed applications based on business viability and credibility, market research, and applicants’ experience. However, business plans were not assessed by business experts, but by caseworkers – civil servants potentially lacking the business expertise needed to assess the viability of business plans.

The Representative of an Overseas Business (Sole Rep) route enabled an individual from an overseas company with no presence in the UK to come to the UK for the purpose of setting up a branch or wholly owned subsidiary. The route was available only if the overseas business intended to keep its headquarters and principal place of business outside the UK. The representative chosen had to be the sole representative of the employer in the UK (hence the route’s ‘Sole Rep’ nickname) and they were required to be a senior employee with full authority to take operational decisions on behalf of the overseas business. As they were not permitted to be a majority shareholder in the overseas business, this prevented owners of overseas businesses from being able to move to the UK themselves to set up their UK branch or subsidiary.

There was no specific genuineness test for individuals applying in the Sole Rep route, however following the closure of the Tier 1 (Entrepreneur) route to new applicants in March 2019, it became apparent that applicants were being assessed against a genuineness test as they were being interviewed in the same way that Tier 1 (Entrepreneur) applicants had been previously. Perhaps unsurprisingly, in December 2020 when the Sole Rep route received a makeover and its own Appendix in the Immigration Rules, a genuineness test paragraph was inserted. The route shortly closed however to new applicants just 15 months later in April 2022.

Settlement in the UK

For individuals coming to the UK to set up in business who wanted to make the UK their permanent home, the Tier 1 (Entrepreneur) and Sole Rep routes both enabled this to happen as applicants could apply for settlement (indefinite leave to remain or ‘ILR’). It is still possible to settle in these routes, usually on completion of five years’ residence in the UK. Tier 1 (Entrepreneur) applicants may be able to settle after spending three years in the UK if they can show they have created 10 or more full-time jobs for settled workers in the UK, or a business income of £5 million or more.

For most individuals holding permission as a Tier 1 (Entrepreneur) there is an imminent deadline of 6 April 2025 to make their application.

A new method of assessment

In March 2019, following the closure of the Tier 1 (Entrepreneur) route to new applicants, two new categories were created: The Start-up category and the Innovator category.  The former was for individuals seeking to set up in business for the first time, and the latter for more experienced applicants with access to £50,000 to invest.

These routes introduced a new two-stage process for obtaining immigration permission to set up in business in the UK. Applicants had to apply for an endorsement of their business idea from an approved third-party endorsing body before being able to apply for immigration permission. This new system of outsourcing the review of business plans took the assessment away from civil servants and placed it into the hands of industry experts. The list of endorsing bodies was long (more than 60) and whilst this was a welcome change to how prospective businesses were being assessed previously, the appointment of the endorsing bodies was rushed. Further, with this being such a new idea, they had no experience of how to mark applicants against the UK government’s specific criteria.

To obtain an endorsement, applicants had to demonstrate that they had a business idea which was innovative, viable and scalable. For both the Start-up and Innovator endorsements this required demonstrating that they had a genuine, original business plan that met new or existing market needs or created a competitive advantage, was realistic and achievable based on their available resources, and that they had or were actively developing the necessary skills, knowledge, experience and market awareness to successfully run the proposed business.

For the Start-up endorsement it was necessary to show evidence of structured planning and of potential for job creation and growth into national markets. For Innovators, the potential for growth into international markets also needed to be shown.

The Start-up category did not lead to settlement and permission was only issued for 2 years. Applicants wishing to settle in the UK therefore had to switch into the Innovator category which did lead to settlement after 3 years, provided stringent criteria were met.

The routes did not last long and in July 2023 the Start-up category was scrapped, and the Innovator category rebranded into the Innovator Founder route.

Current routes

The Innovator Founder route is now the only category available to individuals seeking to set up and run a new business in the UK. The requirement to evidence access to at least £50,000 in funds was removed but the structure of the route has remained the same. It is still a two-stage process requiring individuals to apply for an endorsement of their business idea and the endorsement criteria are the same. There are however just 4 endorsing bodies now to choose from.

The removal of the requirement to evidence capital upfront has made the route more accessible but applicants must still demonstrate that their business plan is realistic and achievable based on the resources available to them. This must necessarily include demonstrating to the endorsing body how they will fund the proposed business.

What is helpful about the Innovator Founder category is that it has retained the specified criteria that applications are marked against for an endorsement to be issued. This is a welcome improvement on the Tier 1 (Entrepreneur) category as it enables an objective assessment to be made whereas there was less transparency on how business plans were being marked before. That business plans are continuing to be assessed by experts through endorsing bodies is good, however it has become increasingly apparent that the UK government is not relying on endorsing body assessments unquestioningly.

The Innovator Founder category, like the Start-up and Innovator routes, contains a requirement that the applicant is a ‘genuine’ Innovator Founder. The business plan must be ‘genuine’ as well as original. This provides the Home Office with permission to second guess the assessments made by endorsing bodies. Unfortunately, this can often take us back to square one where civil servants are again marking business plans without having the necessary experience to do so.

As an example, the Home Office may question an endorsement indirectly by requesting substantial additional documentation at stage two of the process when an applicant submits their immigration application. If an endorsing body has already carried out the required assessment of the genuineness of a business plan, it should not be necessary for the assessment to take place a second time by the Home Office when the applicant applies for their immigration permission.

Settling in the UK as an Innovator Founder is not easy.  As a Tier 1 (Entrepreneur) you could settle by showing the creation of at least 2 jobs for settled workers that have existed for 12 months. If you want to provide evidence of job creation as one of the two ‘achievements’ for settlement as an Innovator Founder, the number of jobs is 10 unless you have created 5 jobs that pay at least £25,000 per year. Whilst there is no longer a requirement to evidence access to £50,000 at the point of applying for an initial endorsement, you may show that you have invested at least £50,000 into your business as one of the two ‘achievements’. The options for the second achievement include the generation of a minimum annual gross revenue of at least £1 million, or £500,000 with £100,000 generated from exporting overseas. These high-level requirements mean that Innovator Founders may find themselves unable to settle after three years and needing to extend their permission for three more.

UK Expansion Worker  

When the Sole Rep category ended in April 2022, the UK Expansion Worker category was introduced as an alternative option for businesses wishing to send one or more individuals to the UK to set up a branch or subsidiary. The differences between the Sole Rep category and the UK Expansion Worker category are significant.

The UK Expansion Worker falls under the broader Global Business Mobility (GBM) category and as such is a sponsored route which does not lead to settlement. The UK government has therefore brought the immigration options available for companies wishing to expand their businesses to the UK under the umbrella of the existing sponsorship machinery. Applicants must hold a valid Certificate of Sponsorship, have worked for their employer outside the UK for at least 12 months and be paid a minimum salary. But immigration permission can only be obtained for two years. Individuals holding this permission are expected to switch into the Skilled Worker category (following the sponsor’s switch to a Skilled Worker licence) after two years.

Before a UK Expansion Worker application can be made by any employees, the business must first apply for and obtain a GBM: UK Expansion Worker Sponsor Licence, representing an additional administrative burden. For an overseas business to be eligible, it must have an active trading presence and have been trading overseas for a minimum period of at least 3 years.

The licence application requires substantial documentation to be provided. This can include financial statements for the overseas business, its corporate bank statements, evidence of business generated in the form of contracts or evidence of advertising for goods or services. Evidence must be provided to show that the overseas business has the required resources to cover the initial costs of expanding the business to the UK for the first 12 months and evidence of the expansion plan itself must also be provided. It is probably unsurprising therefore, that applications can take some time to be processed.

As residence in the UK as an Expansion Worker does not count towards any residence period for settlement and individuals who hold this permission are expected to switch to the Skilled Worker category it will take longer for individuals moving to the UK for the purpose of expanding the overseas business to settle rendering the route less appealing than its predecessor.

On a positive note, there is no prohibition on UK Expansion Workers being a majority shareholder in their business meaning that business owners may now move to the UK to set up their UK presence and this is a welcome change.

Conclusion: a difficult climate for entrepreneurs

The options available to individuals and overseas businesses looking to set up in the UK are now quite limited and one thing is clear:  whether you are an individual looking to set up a new business of your own, or an overseas business looking to expand to the UK, your application will be subject to rigorous scrutiny.

If you apply as an Innovator Founder you must have a business idea that is innovative, viable and scalable, and regardless of your having satisfied the required endorsing body of this, the Home Office may still wish to be satisfied that you are a genuine entrepreneur looking to set up in business in the UK. Your qualifications, financial circumstances and progress against your business plan if you apply under the same business criteria will be examined in depth.

Similarly, if you are an overseas business looking to expand to the UK, you will need to be prepared to lay bare your company’s financial circumstances overseas and provide full transparency regarding its business plan for expansion to the UK. Your overseas company will be thoroughly examined before a Sponsor Licence may be issued enabling you to send senior employees to the UK.

The Home Office’s commitment to the ongoing outsourcing of the assessment of business plans is commendable but care should be taken to ensure that the process is not undermined by unnecessary scrutiny following successful endorsements.

The removal of the restriction on majority shareholders being able to move to the UK to set up branches of their overseas companies is also a welcome development. But the UK Expansion Worker offering does need to be made more user-friendly. Placing the route into the sponsorship machinery as a concept for normalising will have likely looked good on paper, but the process is for now, from a practical perspective, cumbersome at best. Work could be done to make the process more user friendly and less off-putting to businesses seeking to expand to the UK.

The options available betray the UK government’s ongoing struggle with striking a balance between maintaining an effective immigration control and ensuring that the UK remains open for business. It is clear from the evolution of the routes available to entrepreneurs and businesses that whilst options do exist for individuals to come to the UK to set up in business, the requirements to be met, whether deliberate or not, are sufficiently difficult so as to deter all but the most persistent of applicants.

Get in touch

LDI can advise on your eligibility under the above immigration routes and advise on the most suitable options for individuals and businesses. Please contact us if you would like our assistance and support.