Skip to main content
Insight

The new Scale-up route and how it could support employers

Locations

United Kingdom

Earlier this year the government announced it is introducing the Scale-up visa route. As the route is now live as of 22nd August 2022, we look in further detail at who is eligible for the Scale-up visa, how they can prove their eligibility, and the opportunities and challenges this new category may bring.

Background to the route

The government is particularly keen to support high-growth SMEs which they consider to be the backbone of the UK economy, generating a large proportion of jobs in the UK.  However many employers find the cost and bureaucracy of the Skilled Worker route unworkable and have called for reform, such as the introduction of unsponsored routes.  Earlier iterations of unsponsored visas were the Highly Skilled Migrant Programme and Tier 1 General routes. These were scrapped by the Government at the time as many visa holders were either unemployed or working in lower-skilled occupations. The Scale-Up route attempts to address this issue by requiring the applicant to be sponsored in a highly skilled role initially and will only allow them to extend if they are paid via PAYE, which rules out the self-employed.

Eligibility for the Scale-up route

The Scale-up category is aimed at employers who are in a sustained period of high growth.  According to the ScaleUp Institute, there were 33,445 scaleups in the UK in 2019.

To qualify for the visa, The company must be looking to sponsor someone in a high-skilled role on a salary of at least £33,000 per year or the 'going rate' for the occupation code, whichever is higher, for at least six months.

The company itself must have annualised growth of at least 20% in the previous 3 years based either on staff count or turnover. It must have had a minimum of 10 employees at the start of the 3-year period.

This means there is likely to be a sizeable pool of employers who could benefit from this visa. Even so it is a niche category, as not all scaleups will have job vacancies at the correct level and many successful companies will not qualify as scaleups. 

How to prove eligibility

The company must apply for a Scale-Up Sponsor Licence to use this route. In contrast to the Skilled Worker Sponsor Licence application, the company does not have to provide any supporting documents (with some limited exceptions), which should help to greatly speed up the process of preparing and submitting an application. 

Instead, UK Visas & Immigration (UKVI) will use application programming interfaces (APIs) to securely access data which companies have submitted to HMRC, to assess employment growth and turnover growth. The company will only need to qualify on either employment or turnover growth but the Home Office will assess both to give the best chance of success.

To assess employment growth, UKVI will use PAYE information submitted by companies to HMRC via RTI submissions. They will use the most recent 12 month period (ending in the month prior to the date of assessment) and compare it with a 'base month' from the start of the past 37 months. They will calculate an 'in-month average' and assess whether that is a 20% increase in staff numbers.

To assess turnover growth, UKVI will review the information from 'box 6' of the company's VAT return, which amounts to the total sales and all outputs, excluding VAT.  Again, information from the most recent 12-month period (ending in the previous month before submitting) is used as a comparison to the start of the past 37 months to assess if there has been a 20% increase in turnover.

Points to note

Before submitting, companies will need to carefully review their PAYE and VAT submissions over the relevant period to ensure they will not be refused either due to insufficient filing of tax records or if they do not meet the Home Office's test of 20% annualised growth.

It is therefore vital that a company ensures that its PAYE and VAT filings with HMRC are made promptly and are kept up to date and accurate if they wish to apply.

The employer will automatically be refused if for example:

  • They did not have at least 10 employees at the beginning of the past 37 months
Employment growth test
  • There are gaps in their employment data in the past 37 months
  • They do not have at least 37 months' history with HMRC
Turnover growth test
  • They did not have a positive turnover figure at the beginning of the past 37 months
  • The most recent expected VAT submission is not present in the RTI history
  • Their VAT submissions have been overdue in the past 37 months or there have been gaps
  • If they submit using annual VAT returns they will not pass the turnover test. An employer must submit monthly or quarterly returns
  • If they have recently changed their reporting frequency (e.g. monthly to quarterly or vice versa) the Home Office checks may fail

Benefits

The benefits of the visa include:

  • The greatest benefit to employers is that the Immigration Skills Charge which costs up to £5,000 for a 5-year Skilled Worker visa, does not apply to the Scale-up route, which could bring significant savings for some companies.
  • After the person has been sponsored in the route for six months, their sponsorship automatically ends although their visa will be valid for a further 18 months and they can continue working.  This benefits the employer as they no longer have to meet sponsor compliance duties after 6 months. 
  • The person can extend their visa for a further 3 years without sponsorship. Companies who do not qualify as Scale-ups could benefit from an additional pool of talent without the burden of sponsorship.

Downsides

The downsides include:

  • For some companies the salary and skills levels will be too high for the roles they wish to sponsor. The minimum skill level is NQF 6 – degree level skilled roles, whereas for the Skilled Worker route the minimum level is NQF3 or roles skilled at A-level.  The minimum salary is £33,000 rather than £25,600 for Skilled Workers.
  • As the person is unsponsored after six months, this could have a negative impact on retention making it easier for workers to jump ship.  This could lead to employers looking to implement clawback clauses, meaning employees could owe thousands in visa fees if they want to leave a job early..
  • Scale-up holders must pay PAYE on a monthly basis for them to qualify for an extension.
  • The Scale-up licence cannot be extended after 4 years.  Eligible companies will need to switch to the Skilled Worker route and start incurring the Immigration Skills Charge again, if they want to continue to employ foreign workers.
  • After the first six months of sponsorship, the worker can either continue with their Scale-Up sponsor or move to a non-sponsoring company.  However to be able to extend their visa after 2 years or to apply for permanent residence after 5 years, they will need to have earned at least £33,000 per year for at least 50% of their time in the route for an extension or for at least 2 out of the past 3 years for settlement.  Companies who employ workers on this route will need to bear this in mind, as employees who fail to meet these income requirements will need to consider other visa options to maintain their status in the UK.

The introduction of a semi-sponsored route is good news and if it works could lead to more flexibility in future. It is possible that some businesses who would otherwise have discounted sponsorship under the Skilled Worker route due to the high government fees and the compliance burden may now be open to applications from workers requiring sponsorship to address skills shortages. 

For eligible companies, the Scale-up route will require careful assessment of tax records before proceeding.  It is likely to be worth the effort in view of the cost and time savings and the fact that it might attract much needed talent to the UK. However given the restricted nature of the category, it is unlikely to be a long term alternative to the current high-cost, resource-draining Skilled Worker route. This will be a disappointment to many employers who are looking to the immigration system to offer more sustainable recruitment solutions.

Sign up to our email digest

Click to subscribe or manage your email preferences.

SUBSCRIBE