In an increasingly global economy and following the UK’s departure from the EU, UK employers are increasingly utilising international talent, many of whom require visas to be employed in the UK. This has brought renewed focus to the tax treatment of visa‑related costs.
It is commonly accepted that where an employer pays or reimburses an employee’s personal visa costs, such as visa application fees or the Immigration Health Surcharge, those expenses are not automatically tax‑free and will give rise to a taxable benefit. In some cases, an exemption may apply if connected to a qualifying ‘journey’, but otherwise tax is due and, often, captured via an employer’s PAYE Settlement Agreement (PSA).
However, this established understanding does not fully reflect HMRC’s approach in this area.
While the tax treatment of personal visa costs has long been accepted, HMRC appear to be taking a broader view of what constitutes a taxable benefit in this area, which raises important questions for employers.
There are increasing instances of HMRC asserting that all costs associated with obtaining a visa, may fall within the scope of a taxable benefit. This includes the Certificate of Sponsorship (CoS) and Immigration Skills Charge (ISC).
This approach significantly broadens the associated costs now viewed as forming employment‑related benefits, extending beyond those that are clearly personal to the employee.
This interpretation creates a degree of tension with immigration law. The CoS and ISC are obligations of the employer, and from 31 December 2024 it is unlawful for employers to pass these costs on to employees. Employers therefore have no discretion: the costs and charges are mandatory and irrecoverable and yet are still treated as giving rise to a taxable benefit.
This differs from the more commonly understood position that a benefit typically arises where an employee receives or has use something of personal value or where a personal liability is met by reason of the employment.
In some cases, visa costs may fall within the special foreign travel rules, which can provide an exemption where certain conditions are met.
Over the years HMRC have issued limited guidance in Publication 490, covering visas in the very broadest sense. This guidance has not changed since the introduction of the new immigration system with it’s component parts. More recently, Employer Bulletin: December 2018 - HMRC Employer Bulletin Issue 75 also provided limited guidance but again does not go as far as providing commentary on how the cost of the visa is determined for tax purposes.
Since the introduction of the Foreign Income and Gains (FIG) regime in April 2025, there have been significant changes to these special foreign travel rules which potentially limit the availability of this relief to certain individuals – see Are you compliant with post-FIG travel expense rules?
HMRC’s position is that the Certificate of Sponsorship (CoS) and the Immigration Skills Charge (ISC) form a benefit which is employment related, because they are an intrinsic part of enabling the employee to obtain a visa. Given most employers assume the tax obligations on grossed up basis, this will significantly increase employer costs associated with visa sponsorships.
Furthermore, on the basis HMRC have stated, this does not represent a change in approach. As a result, employers may need to revisit how visa costs have been identified and reported historically, rather than viewing this purely as a forward‑looking issue.
The approach taken by HMRC could have broader relevance beyond visa costs.
If all costs that are integral to enabling employment are treated as taxable benefits, similar issues could arise in other areas such as where Disclosure Barring Service (DBS) checks or Financial Conduct Authority (FCA) registrations are required.
With HMRC increasing scrutiny in this area, employers should review how visa costs are identified, categorised and reported, and ensure that any available reliefs are appropriately applied. This includes considering whether historic treatment remains defensible in light of HMRC’s stated position.
For further guidance and support, get in touch with Katy Bond.
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