We recently wrote about the Home Office’s updates to sponsor guidance in March and April this year. Those changes formed part of a broader programme of amendments to the sponsor guidance, including the introduction of a new glossary and a number of changes aimed at strengthening the Home Office’s sponsor compliance framework.
On the 20th of May 2026, the Home Office introduced a formal definition of “operating or trading” and updated its guidance on when it may conclude that a business does not have a genuine operating or trading presence in the UK. The Home Office also introduced new guidance aimed at organisations established primarily for immigration purposes rather than genuine commercial activity.
In this article, Alex Christen and Seán Davies examine the new definition of “operating or trading”, consider what the changes may mean for self-sponsorship arrangements and explore the practical implications for sponsors moving forward.
Has the Home Office quietly tightened the rules on so-called self-sponsorship?
On 20 May 2026, the Home Office introduced a formal definition of “operating or trading” into the Workers and Temporary Workers sponsor guidance glossary. At first glance, the change appears relatively modest. However, when read alongside the accompanying amendments to Part 1 of the sponsor guidance, including new examples of businesses that may fail the operating or trading requirement, and a new mandatory revocation ground targeting organisations established primarily for immigration purposes, the changes confirm the significant policy shift that has been taken by the Home Office towards licence applications for some time.
Whilst the guidance does not expressly refer to self-sponsorship arrangements, the amendments appear designed to strengthen UK Visas and Immigration’s (“UKVI”) ability to distinguish between genuine commercial enterprises and businesses established primarily to facilitate immigration.
What was the position before?
The requirement for a sponsor licence holder to be “operating or trading” lawfully in the UK has always been a key requirement for sponsorship. Businesses applying for a Skilled Worker sponsor licence have long been required to demonstrate that they are genuine organisations operating lawfully in the UK and capable of complying with sponsor duties.
However, despite the importance of the requirement, the guidance never explicitly explained what “operating or trading” actually meant. Companies and advisers were often left to infer the Home Office’s expectations from requests for information at the point of application, refusal decisions, compliance visits (for licences already granted) and evolving caseworker practice.
Applications have long been accompanied by supporting evidence demonstrating that a business is genuine, including evidence of registration with HMRC to run a payroll or latest company accounts. This helped, to a degree, but created particular uncertainty for start-ups, pre-revenue businesses, and newly incorporated companies seeking to obtain sponsor licences where company accounts were not available or did not show evidence of trading activity, for example.
The Home Office response to such applications in recent years involved a higher rate of refusal on the basis that such businesses could not demonstrate they were capable of meeting the eligibility criteria, or their sponsor duties, if a licence were to be granted.
What has changed?
The Home Office has now introduced a formal definition of “operating or trading”. Broadly speaking, “trading” refers to commercial activity involving the provision of goods or services for reward. More significantly, the guidance confirms that “operating” includes both charities and not-for-profit organisations providing services, as well as businesses engaged in pre-trading activities with a view to commencing commercial trading in the foreseeable future.
Overall, this can be seen as a positive development. The guidance now expressly recognises that a business does not necessarily need to be generating revenue at the point of application in order to satisfy the requirement. This provides clarity for organisations that may previously have been uncertain whether they satisfied the operating or trading requirement, particularly charities, not-for-profit organisations, and businesses engaged in pre-trading activities.
Has self-sponsorship been banned?
Not expressly, but the written guidance now reflects how difficult in practice it has become to self-sponsor.
“Self-sponsorship” is not a distinct immigration route, but refers to the concept of business owners or entrepreneurs being sponsored by their own company. In the past, ownership of a business by a sponsored worker had been limited to a 10% shareholding (unless the individual was a high earner). This limitation was removed in 2020 and there is no longer any rule preventing or limiting an individual from owning, controlling or founding a company that subsequently sponsors them under the Skilled Worker route (although investment into a business will be taken into account when calculating if the minimum salary for sponsorship is met).
The May 2026 changes to the guidance now state UKVI will refuse or revoke a licence where its main purpose is to “facilitate the entry or residence of a person who would not otherwise have permission to work in the UK.” Read literally, this could spell the end of self-sponsorship, particularly situations where overseas entrepreneurs used the Skilled Worker route as a means to obtaining immigration status in the UK.
However, there will be scenarios where being sponsored by your own business is only one element of the overall UK business plan and, providing there are additional reasons for the licence application, self-sponsorship is still very much possible. Business owners looking to go down this route will need carefully prepared applications and supporting evidence to avoid refusals (and the subsequent cooling off periods preventing a re-application within a set timeframe).
Why are these changes significant?
The significance lies not in the definition itself, but in the wider amendments introduced alongside it. The updated guidance now provides examples of circumstances in which UKVI may conclude that an organisation does not have a genuine operating or trading presence in the UK.
One example concerns businesses with little or no significant trade activity. The guidance indicates that UKVI may not be satisfied a business is eligible where there is little evidence of genuine commercial transactions with customers, clients, or service users, and where the organisation is funded primarily through investors or related entities, rather than trading income.
A second example concerns what the Home Office describes as ‘circular trading’. The guidance states that where invoices and contracts for services are wholly or mainly between entities linked by common ownership or control, or which share common personnel involved in their day-to-day running, and there is little or no evidence of services being provided to customers, clients or users outside of those entities, UKVI may conclude that the business is not engaging in meaningful operating or trading activity.
The inclusion of these examples is significant because they provide the clearest indication to date of the types of structures likely to attract scrutiny from UKVI.
What is UKVI really concerned about?
Viewed in isolation, the new definition arguably broadens the range of organisations capable of satisfying the operating or trading requirement. However, when read together with the new examples and the introduction of a new mandatory revocation ground, a broader policy objective begins to emerge.
As mentioned above the guidance now permits UKVI to refuse a sponsor licence application where there are reasonable grounds to consider or suspect that an organisation has been established, or exists mainly, to facilitate the entry or residence of a person who would not otherwise have permission to work in the UK.
Historically, it may have been sufficient for a business to demonstrate that it was properly incorporated and capable of satisfying the documentary requirements of the sponsor licence guidance. The revised guidance suggests that UKVI is increasingly asking a different question:
Would this business genuinely exist and operate in the UK even if there were no need to sponsor a worker?
If the answer is yes, the organisation is likely to be in a much stronger position to demonstrate that it is genuinely operating or trading.
If the answer is no, the organisation may face increased scrutiny.
What does this mean for start-ups and founder-led businesses?
The changes are likely to be particularly relevant to:
- newly incorporated companies,
- founder-led businesses,
- pre-revenue start-ups,
- overseas businesses establishing a UK presence, and
- organisations seeking to sponsor founders, directors or major shareholders.
Importantly, the guidance does not prevent such organisations from obtaining sponsor licences. In fact, the new definition expressly recognises that businesses engaged in pre-trade activities, with a view to commencing commercial trading activity in the foreseeable future, may satisfy the operating requirements. This provides clarity for start-ups and early-stage businesses, many of which spend considerable time developing products, securing investment, building infrastructure, or pursuing commercial opportunities before generating income.
However, sponsors should expect increased scrutiny of whether there is genuine commercial substance behind the organisation. Where a business is operational but not yet fully revenue-generating, a clear explanation, and credible supporting evidence, may become increasingly important in demonstrating that the organisation is genuinely operating with a view to commencing commercial trading activity in the foreseeable future.
The key issue is likely to be whether the organisation is pursuing a genuine commercial objective rather than existing primarily to facilitate immigration.
What should sponsors do now?
Businesses applying for a Skilled Worker sponsor licence should carefully consider how they demonstrate that they are genuinely operating or trading in the UK and capable of meeting their sponsor obligations.
While the introduction of a formal definition provides greater clarity, particularly for organisations engaged in pre-trade activities, the accompanying examples suggest that UKVI will continue to scrutinise whether there is meaningful operating or trading activity behind an organisation. This is likely to be particularly relevant to newly established businesses, organisations with limited trading history, and overseas businesses seeking to establish a presence in the UK.
Where a business has not yet commenced full commercial trading, it may be important to explain how its current activities support a genuine commercial objective and the commencement of commercial trading activity in the foreseeable future.
Conclusion
The Home Office has not closed the door on self-sponsorship. However, the May 2026 guidance changes suggest that UKVI is placing increasing emphasis on commercial substance, organisational genuineness, and the purpose for which a business has been established.
The real message behind the amendments may therefore be a simple one: a sponsor licence should support a genuine business need. The stronger the evidence that an organisation exists and operates independently of any need to sponsor a worker, the easier it should be to satisfy UKVI that it is genuinely operating or trading in the UK.
In the meantime, if you would like to discuss how these new updates to sponsor guidance may affect your HR policies and processes, or whether the future changes could have an impact on your plans, please feel free to contact our employment team today.
Seán is a Trainee Solicitor in the Employment & Immigration team. Seán studied both Politics & International Relations and LLB Law at the University of Birmingham, before going on to complete the... Read More
Alex Christen
Partner
Business Immigration, Employment, Employment Investigations, Equality & Diversity, International
Alex is a Partner in our Employment and Immigration team. Alex leads the business immigration team, successfully supporting companies and individuals with immigration issues, including understandin... Read More
