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      UK employers have seen a marked increase in HM Revenue & Customs’s (HMRC) scrutiny of the tax treatment of employer funded visa expenses over the past year. What was once an area of relatively settled practice has become a live compliance risk, with HMRC advancing a significantly broader interpretation of the benefits in kind rules and seeking to collect tax if such costs have been met by an employer on behalf of an employee.

      This GMS Flash Alert summarises the UK tax framework for visa expenses, HMRC’s current approach, some of the concerns raised by the tax profession and the practical implications for employers.

      WHY THIS MATTERS

      In practice, visa expenses are not always managed by Tax or Global Mobility teams. Immigration or Employment Law functions often oversee visa applications, while Finance teams may process payments without visibility of the underlying tax risk.

      This fragmentation increases the likelihood that visa costs are treated inconsistently, or that historical assumptions go unchallenged until an HMRC enquiry arises.

      Whilst the position remains oblique in the absence of formal guidance, HMRC’s current compliance activity presents a risk for employers of unexpected tax and National Insurance Contributions (NIC) liabilities on a retrospective basis, together with interest and the possibility of penalties. If employers choose to protect employees from the tax charge (for example, through gross up arrangements), the cost can escalate significantly.

      Key Highlights

      Overview –The tax framework for visa expenses

      Visa related costs can arise in a wide range of scenarios, including:

      • overseas recruitment and onboarding;

      • international assignments and relocations;

      • visa renewals for existing UK-based employees; and

      • business critical extensions if continued right to work is required.

      From a tax perspective, if such costs are met by an employer, the treatment broadly depends on when the cost is incurred, why it is incurred, and the tax residency status of the employee in question.

      Certain visa costs incurred as part of an employee and their family’s travel to the UK may, in limited circumstances, qualify for relief as “travel facilities” under special provisions within ITEPA 2003. Outside this relatively narrow relief, however, visa expenses have generally been viewed as giving rise to a taxable benefit if they are met on behalf of the employee. HMRC has previously provided limited commentary in its December 2018 Employer Bulletin.1

      Historically, however, an important distinction has been drawn between costs that benefit the employee directly (such as visa application fees and the Immigration Health Surcharge) and business costs that derive from obligations imposed solely on the employer.

      Certificates of sponsorship and the Immigration Skills Charge – a shift in HMRC’s approach

      We have recently seen a significant shift in HMRC’s approach to Certificates of Sponsorship (CoS) and the Immigration Skills Charge (ISC).

      For many years, these costs were widely regarded as non-taxable on the basis that:

      • they are associated with employer-specific obligations under the UK’s immigration regime; and

      • the UK’s Home Office rules2 explicitly prohibit employers from passing these costs on to employees.

      Until recently, this view had not been challenged by HMRC. However, HMRC are now adopting a different approach. In a number of cases we have seen HMRC contend that CoS and ISC costs fall within the very broad definition of an “employment related benefit” in section 201 ITEPA 2003,3 arguing that the payment of these costs is intrinsic to enabling the employee to obtain or renew their right to work in the UK and are therefore costs associated with a “benefit or facility of any kind” which is provided “by reason of the employment”.

      This represents a significant departure from historical practice and is now being regularly raised in employer compliance enquiries, with HMRC seeking grossed-up tax and NIC on CoS, ISC costs, and, in some cases, immigration adviser fees.

      KPMG INSIGHTS

      HMRC’s approach to the taxation of the ISC and CoS continues to generate discussion, with a number of points under consideration. The principal areas of focus are as follows:

      • Employer obligations: The CoS and ISC are statutory costs that employers are required to bear and cannot legally be passed on to employees. This has led to debate regarding their classification for benefit‑in‑kind purposes.

      • Departure from established practice: HMRC’s position regarding CoS and ISC taxation has only recently emerged as part of their compliance activity, representing a change from previous widely accepted treatment and occurring without any specific HMRC guidance.

      • Broader implications: If HMRC’s reasoning were to be applied more widely, it could potentially affect other employer-incurred costs that have traditionally been considered non-taxable, leading to additional costs for employers.

      • Limited guidance: HMRC’s published guidance on the tax treatment of visa expenses does not currently reference CoS or ISC costs. This contributes to ongoing uncertainty, highlighting the need for clearer direction.

      Despite these considerations, we are seeing HMRC maintaining that these costs are taxable benefits unless specific tax reliefs apply. Any challenge to this view would generally need to follow a formal process such as case review, Alternative Dispute Resolution or Tribunal proceedings.

      What employers might consider to do now

      Practical next steps and best practice include:

      • Mapping visa costs: Identify where visa expenses arise across the organisation and who is responsible for approving and paying them.

      • Reviewing historical treatment: Assess how different categories of visa costs have been treated for tax and NIC purposes. Quantify any potential liabilities, including grossed up tax implications if appropriate.

      • Engagement strategy: Consider how to engage with HMRC, either in open enquiries or where an unprompted voluntary disclosure is under consideration.

      • Governance and controls: Ensure future visa costs are reviewed through a consistent tax lens, regardless of which function incurs them.

      How KPMG can help

      KPMG is supporting employers across a range of sectors to:

      • review historical and current treatment of visa expenses;

      • support responses to HMRC enquiries and disputes; and

      • design practical governance frameworks that reflect how visa costs arise in real world organisations.

      As HMRC’s position continues to evolve, proactive review and early action remain important in managing both cost and risk.

      ENDNOTES:

      1  GOV.UK, “Employer Bulletin: December 2018,” last updated on 13 December 2018.

      2  GOV.UK, “Workers and Temporary Workers: guidance for sponsors Part 1: Apply for a licence,” published on 6 March 2026.

      3  Legislation.gov.uk, “Income Tax (Earnings and Pensions) Act 2003.”

      Contacts

      mike-lavan
      Mike Lavan

      Director – Global Mobility and Employment Tax

      KPMG in the UK

      Nicola Sard
      Nicola Sard

      Senior Manager

      KPMG in the UK

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      * Please note the KPMG International member firm in the United States does not provide immigration or labour law services. However, KPMG Law LLP in Canada can assist clients with U.S. immigration matters.

      The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.

      GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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