Reply to: Contract job and Tier 2 visa via umbrella company

[stek]

Good question, but it's a long and complicated answer and I'm not fully up to date on all the details. However, in very broad terms, the idea is that a Tier 2 is used to fill a specific need by a company who can't find the necessary skills locally (i.e. in the EU) and is really meant to allow the movement of experts in various fields across countries served by international companies. Abuse of the system to bring in cheap (and often under-qualified) workers meant that the rules got tightened up, so, at the simplest level, a company can bring in a Tier 2 provided they are employing them directly, even if the worker is actually sourced by an agency of some kind. That worker can then do some freelance work but they have to derive 80% of their income from the visa sponsor and do the additional work as a normal Schedule D self employed person.

If you are bringing in high grade and/or unique skills, you would be on a Tier 1 visa, not a Tier 2, so I have to assume you don't qualify for a Tier 1.

Therefore we (or at least I) don't see why your "agency" is creating an "umbrella". The model you are describing does not match the rules as I understand them. I am therefore forced to think that there is an ulterior motive. Happy to be proved wrong, but...

Tier 1 (Gen) has been closed to applicants for a few years now. That visa (aka HSMP) was the traditional one used to contract on, since it's tied to the person not the company. Tier 1 (Entrepreneur) sort of fills that gap, in a sense it requires money up front and is really for those wishing to start a business and one proviso is you have to employ (British/EU/settled) people, doesn't seem to stop the applicants from contracting on this visa though.

So both visas are having the spirit of their raison d'être being squeezed out of them, of course the ultimate prize is the one at the end, ILR/British Citizenship, whether it's likely to be granted after the 5 years remains to be seen, depends if the UKVI point their radar at it.

[International Adviser]

Thanks, I stand corrected.

However I still fail to understand why the umbrella/PSC would be needed for an employee...

I agree there is no need for the Umbrella Company and a PSC actually makes it worse as it will cause problems in their home country if they remain tax resident there.

[malvolio]

Malvolio - No, I'm here to ask for advice! Can you please explain why it works that way? What issues might be? Is it legal?

Good question, but it's a long and complicated answer and I'm not fully up to date on all the details. However, in very broad terms, the idea is that a Tier 2 is used to fill a specific need by a company who can't find the necessary skills locally (i.e. in the EU) and is really meant to allow the movement of experts in various fields across countries served by international companies. Abuse of the system to bring in cheap (and often under-qualified) workers meant that the rules got tightened up, so, at the simplest level, a company can bring in a Tier 2 provided they are employing them directly, even if the worker is actually sourced by an agency of some kind. That worker can then do some freelance work but they have to derive 80% of their income from the visa sponsor and do the additional work as a normal Schedule D self employed person.

If you are bringing in high grade and/or unique skills, you would be on a Tier 1 visa, not a Tier 2, so I have to assume you don't qualify for a Tier 1.

Therefore we (or at least I) don't see why your "agency" is creating an "umbrella". The model you are describing does not match the rules as I understand them. I am therefore forced to think that there is an ulterior motive. Happy to be proved wrong, but...

[stek]

Correct, the agency is going to be my employer and it is a licensed tier 2 sponsor. AFAIK Umbrella is a limited company to be created by them.

And how much of the rate do they take and do they make you pay the visa costs?

[voodoo]

I don't fully understand either but have found this:
Can I apply for self-employed on Tier 2 (ICT) : UK Tier 2 (Employer Sponsored) visas • Immigrationboards.com

Now I'm waiting for the answers from them. That's weird that in here nobody knows the way such a scheme works.

We do know how it works and why. It's what you're trying to do that is fooling us.

Malvolio - No, I'm here to ask for advice! Can you please explain why it works that way? What issues might be? Is it legal?

[malvolio]

I don't fully understand either but have found this:
Can I apply for self-employed on Tier 2 (ICT) : UK Tier 2 (Employer Sponsored) visas • Immigrationboards.com

Now I'm waiting for the answers from them. That's weird that in here nobody knows the way such a scheme works.

We do know how it works and why. It's what you're trying to do that is fooling us.

[voodoo]

I don't understand either as Voodoo should be employed by the end user client, with the agency taking a placement fee only.

I don't fully understand either but have found this:
Can I apply for self-employed on Tier 2 (ICT) : UK Tier 2 (Employer Sponsored) visas • Immigrationboards.com

Now I'm waiting for the answers from them. That's weird that in here nobody knows the way such a scheme works.

[International Adviser]

I'm Mystified

Thanks, I stand corrected.

However I still fail to understand why the umbrella/PSC would be needed for an employee...

I don't understand either as Voodoo should be employed by the end user client, with the agency taking a placement fee only.

[stek]

Nearly right, what is missed out is that a Tier 2 can normally be granted to the person who "utilises the workers labour (end User Client)" and cannot be sponsored by someone who recruits the worker to be hired on to the end user client.

This means that no agency should be able to sponsor a Tier 2 and the same applies to an Umbrella Company.

What is worse in Voodoo's case it looks as if they are now setting up a PSC for him?

This ^

It goes on though and at the moment the UKVI don't seem to have cottoned on to this exploit yet....

[malvolio]

Nearly right, what is missed out is that a Tier 2 can normally be granted to the person who "utilises the workers labour (end User Client)" and cannot be sponsored by someone who recruits the worker to be hired on to the end user client.

This means that no agency should be able to sponsor a Tier 2 and the same applies to an Umbrella Company.

What is worse in Voodoo's case it looks as if they are now setting up a PSC for him?

Thanks, I stand corrected.

However I still fail to understand why the umbrella/PSC would be needed for an employee...

[International Adviser]

Direct Relationship

In which case I see no need or justification for the umbrella company, other than someone playing fast and loose with taxation law...

I may be wrong but the only way a Tier 2 can work is for the company that holds the visa, although obviously that work can be for the agency's clients. The umbrella serves no purpose since you have to be paid by the agency as an employee.

Nearly right, what is missed out is that a Tier 2 can normally be granted to the person who "utilises the workers labour (end User Client)" and cannot be sponsored by someone who recruits the worker to be hired on to the end user client.

This means that no agency should be able to sponsor a Tier 2 and the same applies to an Umbrella Company.

What is worse in Voodoo's case it looks as if they are now setting up a PSC for him?

[malvolio]

Correct, the agency is going to be my employer and it is a licensed tier 2 sponsor. AFAIK Umbrella is a limited company to be created by them.

In which case I see no need or justification for the umbrella company, other than someone playing fast and loose with taxation law...

I may be wrong but the only way a Tier 2 can work is for the company that holds the visa, although obviously that work can be for the agency's clients. The umbrella serves no purpose since you have to be paid by the agency as an employee.

[International Adviser]

Premium Customer Service Scheme

Have you got a link to more information on this International Advisor?

It looks as if Voodoo has found one himself.

[International Adviser]

Poses More Questions than Answers

Hi Voodoo

So the agency are the Tier 2 sponsor who and you are now going to operate through a Limited Company which is set up by the agency.

This does not look right......

[voodoo]

Visa sponsorship should be from the company for whom you will actually be working - as an umbrella company is an intermediary they should not technically be in a position to sponsor a visa

Correct.