Chapter 18 - Entry for non-work permit employment

18.15 - Persons intending to establish themselves in business in the United Kingdom including self-employed persons ( Rules Paragraphs 200-210 )
This section provides guidance with dealing with non-EEA nationals seeking to enter the UK in order to establish themselves in business or self-employment or seeking to remain in the UK in that capacity.

All applications for entry in this category are a mandatory referral to Business Case Unit in the Home Office.

• Self-employed doctors and dentists are included but investors and self-employed writers and artists are dealt with separately in the sub sections "Writers, composers and artists" and "Concessionary arrangements".
• Guidance for dealing with self-employed lawyers, who are considered outside the rules, is to be found in the section on "Concessionary arrangements".

A person who qualifies under the business paragraphs of the Rules may be issued entry clearance for employment in the UK without requiring a work permit.

A standard letter with information on this category of entry clearance which may be sent to applicants is at Annex 18.9.

Prior entry clearance is mandatory.

Requirements for entry clearance
The requirements to be met by a person seeking leave to enter the UK to establish him in business are:

• that he/she satisfies the requirements of paragraph 202 or 203 of the Immigration Rules (below); and
• that he/she has not less than £200,000 under his/her control and disposable in the UK which is held in his/her own name not held by trust or other investment vehicle and which he/she will be investing in the business in the UK; and
• that until his/her business provides him/her with an income he/she will have sufficient additional funds to maintain and accommodate himself/herself and any dependants adequately without recourse to public funds or to employment (other than his work for the business) or to public funds; and
• that he/she will be actively involved full-time in trading or providing services on his/her own account or in partnership, or in the promotion and management of the company as a director; and
• that his/her level of financial investment will be proportional to his/her interest in the business; and
• that he/she will have either a controlling or equal interest in the business, and that any partnership or directorship does not amount to disguised employment; and
• that he/she will be able to bear his/her share of liabilities; and
• that there is a genuine need for his/her investment and services in the UK; and
• that his/her share of the profits of the business will be sufficient to maintain and accommodate himself/herself and any dependants adequately without recourse to employment (other than his/her work for the business) or to public funds; and,
• that he/she does not intend to supplement his/her business activities by taking or seeking employment in the UK other than his/her work for the business.

Paragraph 202 of the Immigration Rules:
202. Where a person intends to take over or join as a partner or director an existing business in the United Kingdom he/she will need, in addition to meeting the requirements at paragraph 201, to produce:

1. a written statement of the terms on which he/she is to take over or join the business; and
2. audited accounts for the business for previous years; and
3. evidence that his/her services and investment will result in a net increase in the employment provided by the business to persons settled here to the extent of creating at least 2 new full time jobs.

Paragraph 203 of the Immigration Rules:
203. Where a person intends to establish a new business in the United Kingdom he/she will need, in addition to meeting the requirements at Paragraph 201 above, to produce evidence:

1. that he/she will be bringing into the country sufficient funds of his/her own to establish a business; and
2. that the business will create full-time paid employment for at least 2 persons already settled in the United Kingdom.

Definition of a business
For the purpose of Paragraph 201-210 of the Immigration Rules a business means an enterprise as:

• a sole trader; or
• a partnership; or
• a company registered in the UK.

Handling applications:

• all business applications are referred to the Business Case Unit (BCU) via the Referral Mailbox
• entry clearance should not be authorised or refused without reference to the Business Case Unit
• the onus is on the applicant to establish his/her claim
• entry clearance is issued on the basis of a particular business and the applicant must be advised that he/she must seek Home Office permission if he/she wishes to change, after entry, to a different business.

Entry clearance endorsement in this category is
D Business and must be endorsed for 2 years, on code 2 conditions.

Relevant foreign nationals who are entry clearance for longer than six months should be required to register with the police. (Refer to Paragraph 325(2)(i) of the Immigration Rules).

Refusals/Appeals
Refusal of entry clearance as a person intending to establish themselves in a business attract a right of appeal. Appeal statements will be written by Business Case Unit (BCU). All papers should be sent to:

Business Case Unit
WORK Permits (UK)
PO Box 3468
Sheffield
S3 8WA

Tel : 0114 274-3045
Fax : 0114 274-3291

e-mail : bcu@ind.homeoffice.gsi.gov.uk

UK Border Agency - Working in the UK

Finances
The minimum of £200,000 must be invested in the business. Applicants may make their investment by:

• a direct cash investment
• share capital,
• or a combination of the two, the proportion of which does not matter.

The following, however, are not acceptable:

• a "director’s loan" cannot be accepted unless it is unsecured and in favour of third party creditors
• an investment from or through an off-shore company, even where the investor is the sole beneficial owner of the off-shore company.

Source of funds
The money must be the applicants own money and not from another source, however close that source might be.

A gift of money and/or shares in the business would be acceptable only where it can be established that the gift was genuine. A gift, for example, from a business associate or other person who has a commercial relationship with the applicant would not be acceptable since we could not be satisfied that the arrangement did not amount to disguised employment.

A copy of an irrevocable Deed of Gift should be requested to ensure that the money is under the applicant’s own control.

Funds above the minimum of £200,000
Money for investment in the business over and above the minimum £200,000 may be raised by way of bank or other loans or grants generally available to the public, say, under a government enterprise scheme.

Property
If the applicant proposes to buy premises which include residential accommodation for himself/herself and his/her family, the value of this part of the property should be deducted from the business investment. There should also be sufficient additional funds to support and accommodate the applicant and his/her dependants until the business is profitable.

Level of Financial Investment
The applicant’s level of financial investment must be proportional to his/her role in the business and he/she must have either a controlling or equal interest in the business, i.e. he/she should have more than a 50% interest or be one of a number of partners or directors with equal interest, e.g.

• a person who has a majority or equal financial interest in a business but who never the less clearly has no major say in running the business or setting its policy will not have an interest in the business proportional to his/her investment.
• A person holding a 5% share in the firm in which the other directors each held 20% or more would not have an equal or controlling interest in the business unless the voting rights were weighted. Whether or not the voting rights were weighted he/she would fall to be regarded as not having made an investment equal to his/her interest in the business and would require a work permit. Where, however, such an applicant falls for refusal on these grounds but he/she more than meets the investment and employment requirements and his/her expertise and voting rights give him/her an authoritative voice in the business, discretion may be exercised.

Business Plan
A detailed business plan showing the objective of the business, the investment and employment involved and financial projections should be submitted. The plan should include the following minimum information:

• Evidence that the applicant has not less than £200,000 of his/her own money under his/her control and disposal in the UK to be invested in his business;
• The objective of the business;
• How many full-time jobs the business will create for people already settled in the UK (employees, likely pay, hours and duties should be described);
• The projected opening balance sheet following the start of the business. This should contain the following details:-
  • The financial outlay;
  • Any loan to the company (this must be unsecured and fully subordinate to third party creditors);
  • Assets, fixed and tangible;
  • Stock (the stock should be described);
  • Number and value of paid-up shares;
• Projected trading and profit/loss account;
• Overhead expenses which should detail the following:
  • Establishment expenses;
  • Administration expenses (individual salaries of staff including the applicant should be given);
  • Other expenses and depreciation.

An applicant must be able to justify projected figures given above, if so requested, (e.g. with evidence of market research).

If the applicant is joining or taking over an already established business he/she must produce “audited” accounts for at least the previous two years and firm evidence that new paid, full-time employment for persons already settled in the UK will be created.

The applicant’s role in the business
The applicant should be actively involved full-time in running the business. This requirement is to ensure that the applicant is to be economically active as a businessman/businesswoman and not using his investment as a means of establishing himself/herself in the UK for some other purpose.

An applicant who does not wish to work full-time but has a large sum of money to invest in the UK should apply for entry clearance as an investor - see "Investors".

(Paragraph 224 of the Rules).

Creation of employment
The business plan should show details of 2 new full-time jobs to be created within the first 12 months. These should be substantive posts and not short-term posts for trainees. Where there is an existing business, the business plan should show details to confirm that the new full-time jobs are not to be at the expense of existing part-time jobs and that overall “man hours” of employment among the staff are to be increased. If the applicant is joining or taking over an existing business, full details of existing employees must also be provided.

Need for services and investment
The applicant must show that at least £200,000 of his/her own money is to be fully used in the business. Unless there are uncertainties about the bona fides of the applicant it will normally be sufficient to concentrate on evidence of funds and the requirement to provide employment. If an investor can produce the sum required from his/her own funds, there is a strong presumption that he/she expects the business to succeed, especially if additional funds are being provided by a bank etc. The applicant should, however, be asked to justify the basis of his/her financial projections if necessary with details of any market research he has undertaken.

Types of business – The Rules define a business as being an enterprise as a:

1. a sole trader;
2. a partnership; or
3. a company registered in the UK.

Sole Trader
A sole trader trades under his/her own name.

A sole trader receives all the profit and bears all the losses of the business, is personally responsible for all debts, can be made bankrupt and his/her belongings can be sold to pay creditors.

A sole trader is treated by HM Customs and Revenue as a self-employed person and pays tax under Schedule D. He/she pays National Insurance at the "Self-employed" rate.

Partnership
Consists of two or more (2-20) people. There are no compulsory formalities but when no voluntary agreement exists the business is assumed to be regulated by the Partnership Act 1890.

A partner may at any time withdraw from the partnership by taking out his/her assets if there is no agreement to settle such a question.

Partnerships do not have to be registered but if any title, other than the partners' names are used, it must be approved by the Registrar of Business Names.

Accounts are not open to public inspection, nor must they be submitted to the Registrar of Companies.

There are tax advantages in forming partnerships, depending on the division of the profits.

No partner is entitled to be paid a salary for the services he/she gives to a partnership; he/she gets only his/her share of the firm's profits.

Each partner can be made personally liable for the debts of the partnership. Creditors may sue an individual partner, a group of partners or the firm itself. A partner who is sued can be made bankrupt if he/she fails to pay the debts or to obtain contributions from other partners - even though the debts were incurred by another partner.

Limited partnerships
The only way a person can avoid being wholly liable for the debts of the partnership is by becoming a "sleeping partner". This is when a partner retires but wishes to retain an interest in the partnership. Such partnerships must be registered with the Registrar of Limited Partnerships, Companies House, 55-71 City Road, London EC1Y 1BB.

Ending partnerships
If one partner agrees with the other to leave, the partnership ends. If there is no written agreement any partner can at any time give notice to the others that he/she wants to end the partnership. The partnership ends when a partner dies, or if a partner becomes bankrupt - unless otherwise provided in an agreement.

If a partner is replaced, a new agreement is required even if the only change is the partner's name.

Company
Founders of a company become shareholders. Liabilities can be limited (see below) and belongings cannot be seized to pay debts, depending on the type of share. In law, a company has an existence of its own, apart from its shareholders therefore, if the company is fined or sued shareholders are not personally responsible.

All companies must be registered with the Registrar of Companies before they can begin trading.

Companies can be private or public.

Public companies normally have shares which can be bought and sold on the stock exchange.

They must have at least seven shareholders, two directors and a company secretary; there is no limit on the number of shareholders.

A certificate must be obtained from the Registrar of Companies before trading begins.

Companies may, in law, be public and not be quoted in the stock exchange.

Public Companies are suitable for large-scale enterprises. Since companies decide to go public primarily in order to raise money from outside sources, the small businessman/businesswoman is not likely to find it advantageous to go public.

Limited companies
In a limited company there is no risk to the personal shareholders who cannot be sued for the company's debts.

The shareholder only loses his/her investment. A limited company must be registered and make public its accounts. It should be noted that a private company can be limited.

Unlimited companies
Unlimited companies do not reveal profits or accounts. There is no limit on the liabilities of shareholders. They can reduce their capital without permission from the courts and buy their own shares. Both limited and unlimited companies are subject to the Companies Act 1948 and 1967.

Self-employed lawyers
Applications by solicitors, barristers and law consultants seeking to set up in practice here are considered under a concession, outside the Rules - see "Fresh Talent".

They do not have to meet the requirements of Paragraphs 201-203 of HC 395 to invest £200,000 in the business or to create 2 new jobs for persons settled in the United Kingdom.

Spouses and dependent children of persons intending to establish a business in the UK ( Rules Paragraphs 194-199 )

Prior entry clearance is mandatory and all applications must be referred to the Business Case Unit via the Referrals mailbox (see Chapter 25).

The entry clearance requirements for spouses, civil partners, partners and dependent children of persons in this category are the same as those of teachers and language assistants - see "Teachers and language assistants".

Unmarried or same-sex partners: ( Rules Paragraph 295J )

For entry clearance requirements for unmarried or same-sex partners of persons in this category see "Newspaper representatives".

Refusals/Appeals
Refusal of entry clearance as the dependant of a person intending to establish themselves in business attract a full right of appeal, except where the principal applicant has themselves had their application for entry clearance refused.

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