What changed on 20 May 2026
The Home Office has introduced a new ground for refusing sponsor licence applications and revoking existing licences. It targets organisations that were set up, or that continue to exist, mainly to help a worker enter or stay in the UK when they would not otherwise have permission to work here. Both the refusal ground and the revocation ground are mandatory, meaning there is no discretion, no action plan, and no opportunity to fix things first. If the Home Office has reasonable grounds to suspect this applies, the licence will be refused or revoked.
The refusal ground
At the application stage, the Home Office will refuse a sponsor licence if it suspects the organisation was established, or exists, mainly to facilitate immigration. The guidance references this as Annex L1(v). It applies regardless of how long the organisation has been in existence or how many employees it has.
The revocation ground
For organisations that already hold a sponsor licence, the same test applies as a mandatory revocation ground, referenced as Annex C1(oo). If the Home Office forms the view that the sponsor exists mainly to facilitate immigration, the licence will be revoked. The Home Office may suspend the licence while it investigates, but if the suspicion is confirmed, revocation follows without an opportunity for remediation.
The threshold
The standard is "reasonable grounds to consider or suspect." This is not a balance of probabilities test and does not require proof. The Home Office does not need to demonstrate beyond doubt that the organisation was created for immigration purposes. It needs only to form a reasonable suspicion. For organisations with limited trading history, thin evidence of genuine commercial activity, or ownership structures that mirror the proposed sponsorship arrangement, this threshold can be met relatively easily.
The example in the guidance
The Home Office has included an illustrative scenario. A foreign national registers a UK company from abroad, employs a UK-based worker to act as the Level 1 User on the Sponsor Management System (SMS), and then uses the licence to assign a Certificate of Sponsorship (CoS) to themselves. This is the specific pattern they have codified: the person who controls the sponsoring entity is also the primary beneficiary of the sponsorship.
Who is most at risk
The primary target is organisations where the founder, director, or shareholder is also the sole or main proposed sponsored worker. New companies with a single overseas director who is also the intended CoS recipient will face the highest scrutiny. But the ground is drafted broadly. It could also apply to dormant companies being reactivated specifically to obtain a licence, organisations with no credible business plan or external customers, and entities where the proposed sponsored worker has a controlling interest.
If this does not describe your situation, you are likely fine
For the vast majority of Borderless clients, this ground will not apply. If your organisation has genuine trading activity, real customers, and a credible reason for sponsoring workers that is rooted in business need, these provisions are not aimed at you. They are aimed at a specific abuse pattern, and the Home Office has been clear about that. The ground exists to catch arrangements where immigration is the main purpose of the organisation, not a consequence of its growth.
How this connects to the operating or trading requirement
This ground works alongside the new formal definition of "operating or trading" introduced in the same guidance update. An organisation that cannot demonstrate genuine external trade or real service delivery is more likely to be assessed as existing mainly to facilitate immigration. Evidence of real commercial or operational activity, external customers, and a credible business purpose all help. We cover the operating or trading definition in detail in a separate article.
Concerned about your situation?
If you are applying for a sponsor licence and your circumstances resemble the pattern described above (for example, you are both the director and the proposed sponsored worker, or your company is newly formed with limited trading activity), speak to your Borderless contact before proceeding. We can review your evidence, flag any risks, and help you put together the strongest possible application. If you already hold a licence and have concerns, the same applies. It is better to get ahead of this than to be caught off guard during an audit.