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Viewing Contracting on a UK Work Visa from 2 How an Umbrella Company Works - What Contractors Should Know When First using an Umbrella Company Written by Contractor Supermarket

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Contracting on a UK Work Visa

Each year thousands of high level professionals from Australia, New Zealand, South Africa and India travel to the UK on temporary work visas to build careers as freelance contractors.

Many are unsure of which visa to use and what contracting structure to operate through while working in the UK.

This article looks at the 4 most common work visas for expat professionals and the contracting options (Umbrella Company or Contractor Limited Company) available with each.

Tier 1 (General Highly Skilled Migrant)

Overview: Tier 1 of the new points based immigration system is made up of four sub categories. The sub category most relevant to high level contractors is the General Highly Skilled Migrant sub category which effectively replaces the old Highly Skilled Migrant Programme (HSMP).

At present the new Tier 1 (General) arrangements only apply to those individuals applying from within the UK or from India. Individuals from all other countries should continue to apply under the existing HSMP arrangements.

To qualify for the visa an individual must gain 75 points from 4 categories (Qualifications, Age, Previous Earnings and UK Experience) and satisfy the English language and Maintenance requirements.

Once approved an individual can work freely in the UK for a period of up to 5 years, with an extension required after the first 3 years.

For more information on qualifying under Tier 1 or the HSMP use the points calculator available at http://www.workpermit.com/uk/uk-immigration-tier-system/tier-1/general-highly-skilled-migrants/points-calculator.htm

Contracting Options

The Tier 1 Visa is the ideal long term work visa for individuals wishing to build a career as a contractor in the UK. Holders are free to use an Umbrella Company solution or Contractor Limited Company to deal with contract income.

Limited Company may not be the best option for those wishing to extend the visa. Those using Ltd Companies normally set artificially low salaries of around £12k pa in order to maximise profit distribution.

This income structuring can cause problems when proving Income under the previous earnings scoring category.

Work Permit

Overview: A Work Permit is an Immigration approval that allows a UK employer to recruit a named non EEA national to do a specific job where unable to find a suitable ‘resident worker'.

It is important to understand that the work permit application is made by the employer and that the work permit is approved for the named worker.

It is not possible for an individual to make a work permit application. Work Permits are very restrictive and only allow the holder to work specifically for the named employer.

Contracting Options

Work Permits are not suitable for contractors who wish to work in the UK. However, many high level professionals (especially those in IT) who are unable to secure Tier 1 (General) Visas often find consultancies offering work permit sponsorship who allow them to work on project based assignments.

Consultants going down the consultancy path often gain similar experience to freelancers and can of course become fully fledged freelance professionals once they secure Indefinite Leave to Remain or an alternative work visa that allows freelance work to be undertaken.

Working Holidaymaker Visa (WHV)

Overview: Working Holidaymaker Visas are a great option for Commonwealth Citizens (mainly from Australia, New Zealand and South Africa) aged between 17 and 30 who are looking to work in the UK on a short term basis. Once approved the visa allows the individual to work for a period of up to 12 months in 2 years.

Contracting Options

Those holding Working Holidaymaker Visas can use Umbrella Companies or Contractor Limited Companies to deal with contract income however Australians should be aware that dividend income taken from a Limited Company may be taxable by the ATO.

Ancestry Visa

Overview: Citizens of a Commonwealth country with a grandparent born in the UK (including the Channel Islands and Isle of Man) may be eligible for an Ancestry Visa. Those fortunate enough to qualify can work in the UK for up to 5 years without restriction after which time they may apply for Indefinite Leave to Remain.

Contracting Options

Those holding Ancestry Visas can use Umbrella Companies or Contractor Limited Companies to deal with contract income. Holders of Ancestry Visas are not restricted in any way.