New Visa Categories to Replace Tier 1 (Graduate Entrepreneur) and (Entrepreneur); Changes to Tier 1 (Investor) Route

At a Glance

The UK Government has proposed fundamental changes to the Tier 1 visa category through a Statement of Changes released today. Changes include:

• Introduction of new Start-up and Innovator visa categories to replace the Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) routes, with applicants in these categories assessed by trusted endorsement bodies vetted by the UK government;
• Investment threshold would be removed for the Start-up visa and reduced to GPB 50,000 for the Innovator category;
• English language levels for both categories will be set at B2 (higher than B1 for the current categories);
• Increased scrutiny over the source of funds for Tier 1 Investor applicants by extending the requirement to hold the investment funds from 90 days to two years, and by restricting rules to make it explicit that banks must carry out all due diligence checks before opening accounts for potential applicants; and
• Investment in UK government bonds would be excluded for all new Tier 1 Investor applicants to encourage investment in alternative forms.

The proposed changes are scheduled to take effect on March 29, 2019. Applications under the existing Tier 1 (Graduate Entrepreneur) route can be made until July 5, 2019.

The situation

In a Statement of Changes, the UK government has proposed the introduction of new Start-up and Innovator visa categories to replace the Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) routes, together with restricted rules for the Tier 1 (Investor) route.

A closer look – the Start-up visa

• Tier 1 (Graduate Entrepreneur) route to be closed. The Start-up visa would replace the graduate entrepreneur route which would be closed to new applicants from July 5, 2019.
• Expanded eligibility. The category would be open to applicants starting a new business for the first time in the United Kingdom, not just recent graduates.
• Removal of funding requirement. Applicants would not need to have secured any initial funding for their proposed business.
• New endorsing bodies. Applicants would need to be endorsed by an independent endorsing body which has been vetted and approved by the UK government.
• Longer visa validity.  The visa would be granted for two years initially (doubled from  one year under the Graduate Entrepreneur category) and applicants would be able to switch into the Innovator category to continue progressing their business.
• Effect on existing Tier 1 (Graduate Entrepreneurs). Transitional provisions would allow Tier 1 (Graduate Entrepreneurs) to switch into the Start-up route or alternatively continue to switch into the Tier 1 (Entrepreneur) category until July 5, 2021.

A closer look – the Innovator visa

• Tier 1 (Entrepreneur) route to be closed. The Innovator visa would replace the Tier 1 (Entrepreneur) route which would be closed to new applicants from March 29, 2019.
• New expert endorsement requirement. Applicants would need to be endorsed by a designated endorsing body approved by the UK government, who would assess whether the applicant’s proposed business is innovative, viable and scalable. The Home Office has not confirmed which bodies would be authorised to issue endorsements yet, but has set out criteria with which the endorsing bodies must comply.
• Eligibility for Indefinite Leave to Remain (settlement). Innovators who satisfy at least two of the Home Office’s new criteria may qualify for settlement after three years, down from five under the existing route. The criteria include:
  
  • Investing at least GBP 50,000 into a business;
  • Doubling the business’s customers;
  • Applying for intellectual property protection after research and development activity;
  • Generating annual gross revenue of GBP 1 million;
  • Creating 10 full-time jobs for resident workers.

• Effect on existing Tier 1 (Entrepreneurs). Existing Entrepreneurs can continue to extend their visa under the current rules until April 5, 2023, but would be required to provide more detailed information on their role in the business and the jobs they have created. Settlement applications for existing Entrepreneurs will remain open until  April 5, 2025.

A closer look – the Investor visa

• Increased scrutiny over funding. New Investor visa applicants would need to prove they have had control of the required GBP 2,000,000 investment funds for the last two years, up from 90 days under the existing rules. If the funds have been held for a shorter period, applicants would need demonstrate the source of the investment funds. An expanded test will allow the Home Office to refuse applications where there are grounds to believe the investment funds have been transferred internationally by unlawful means. Further, rules are being restricted to make it explicit that banks must carry out all due diligence checks before opening accounts for potential applicants.  
• Investment in government bonds no longer accepted. Under the proposed changes, investment in government bonds would be precluded, to incentivise investment in active and trading UK companies.
• Effective date. The proposed changes will apply to all new applications made on or after March 29, 2019. Transitional provisions are in place to protect existing Tier 1 Investors, who can apply to extend their visa under the existing rules (subject to some minor alterations) until April 5, 2023 and apply for settlement until April 5, 2025.

The above proposals do not affect the Tier 1 (Exceptional Talent) category.

Impact

The changes should broaden the scope for overseas entrepreneurs to start a business in the United Kingdom with reduced or no prior funding. The changes would also place the role of assessing the viability of proposed businesses on new endorsing bodies, rather than Home Office officials.

By contrast, the proposed changes require prospective Tier 1 Investors to demonstrate the source of their funds over a much longer period. The changes should also encourage direct investment in UK companies rather than via government bonds.

Background

The proposed changes follow a review by the independent Migration Advisory committee, which recommended that an endorsement approach should be introduced in the Tier 1 (Entrepreneur) category. The committee further recommended substantial reform to the Entrepreneur category on the grounds that it had produced low quality businesses which added little or no benefit to the UK economy.

The changes are designed to encourage the development of and investment in viable, innovative and scalable businesses in the United Kingdom. 

The proposed changes to the investor visa were announced in December but were not implemented pending research on the best way to achieve the desired policy goals.

Looking ahead

The government proposals are scheduled to take effect on March 29, 2019 (July 5, 2019 for the closure of the Graduate Entrepreneur scheme), but still require parliamentary approval. Fragomen will monitor the situation and will report on relevant developments.  

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].