The ‘operating or trading’ definition is of paramount importance for sponsor licence applications and later for sponsorship compliance. Home Office changes to ‘trading or operating’ have been introduce to in Home Office sponsor guidance on 20th May 2026 and this article outlines those changes.
If you have no operating or trading presence in the UK Home Office will refuse your sponsor licence application.
If Home Office find you have no operating or trading presence in the UK after granting a licence, they will revoke your sponsor licence. Annex C1(oo) of the sponsor guidance permits the Home Office to revoke a sponsor licence where it has reasonable grounds to believe or suspect that an organisation has been established, or exists mainly, to facilitate the entry or residence of a worker who would not otherwise have permission in the UK.
New paragraphs have been inserted in Home Office sponsor guidance include an outline of Home Office interpretation of ‘trading or operating’. Furthermore, examples of where Home Office is unlikely to be satisfied that an organisation is operating or trading for the purposes of the sponsorship scheme.
Operating or trading for sponsor licence
Home Office introduced the ‘glossary’ where the Home Office understanding of ‘operating or trading’ is outlined.
The Home Office guidance states that ‘operating or trading’ is not defined in law and, unless otherwise stated in any part of this guidance, has a plain meaning.
According to Home Office guidance, ‘Broadly, ‘trading’ can be taken to refer to operations of a commercial kind by which the trader provides to customers for reward some kind of goods or services.‘
According to Home Office guidance, ‘Operating’ includes the activities of both:
• charities and other not-for-profit organisations where they are providing a service to clients, customers or service users
• businesses who are engaged in pre-trade activities with a view to commencing commercial trading activity (as defined above) in the foreseeable future.
Some further information, including examples of when Home Office are unlikely to consider your organisation to be operating or trading in Part 1 sponsor guidance.
Examples of Operating or Trading
Below are two examples of where are likely to conclude that you do not have an operating or trading presence in the UK. These examples are not exhaustive:
Example 1: no significant trade activity You apply for a sponsor licence. Excluding payments made to HMRC and utility, leasing, insurance and other related bills, there is no evidence of financial transactions taking place between your organisation and any customers, clients or service users. All or most of the finance your organisation is receiving is being supplied directly by a related company or private investors, rather than through trading activity. In this scenario, we are unlikely to be satisfied that you are actively trading as a business for the purpose of holding a sponsor licence.
Example 2: trading with related entities (‘circular trading’) You apply for a sponsor licence. Although you have provided invoices and contracts for services, these are wholly or mainly between entities linked to you by common ownership or control, or which share common personnel involved in the day-to-day running of the relevant entities. There is little or no evidence of providing any services to customers, clients or users outside of your organisation (or those entities). In this scenario, we are unlikely to be satisfied that your business is engaging in meaningful operating or trading activity and is instead engaged in a system of ‘circular trading’ to move money through linked businesses for the purpose of acquiring a sponsor licence.
What ‘trading or operating’ as newly defined by Home Office mean for sponsor licence applicants and sponsor licence holders
In short, sponsor licence applicants should read and get a good understanding of the ‘trading or operating’ meaning provided by Home Office and ensure that can meet the criteria and provide the relevant evidence with their sponsor licence application.
Those who already hold sponsor licence need to assess their circumstances in light of the Home Office guidance to assess their position. Do they have genuine commercial presence, is their business ‘trading with related entities’ as per Example 2 above.