UK Tier 1 Investor Reforms
May 29, 2015
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The United Kingdom’s Tier 1 Investor programme has undergone two rounds of significant reform in the last six months, with changes introduced to eligibility and ongoing requirements within the programme. Coupled with the recent introduction of the Immigration Health Surcharge and Biometric Residence Permits for overseas applicants, the milieu for applications now looks markedly different. Changes were perhaps inevitable. The Tier 1 Investor category had long escaped the repeated revisions and reforms seen across other categories of the Points-Based System since its introduction in 2008, of which the Court of Appeal has lamented: 'The provisions have now achieved a degree of complexity which even the Byzantine emperors would have envied'[1].
Investment threshold and the November 2014 changes
The minimum investment threshold for the Tier 1 Investor visa was raised on 6 November 2014 to £2,000,000.
Restrictions were also imposed on acceptable investments and, whereas Tier 1 Investors could previously hold up to 25% of their investment in cash funds or UK property, they must now invest the full sum (£2, £5 or £10 million) in UK Government bonds, share capital or loan capital in active and trading companies that are registered in the UK (other than those mainly engaged in property investment, property management or property development).
The 6 April 2015 reforms
Further changes were introduced on 6 April 2015 which include the increase in the minimum age of investors from 16 to 18.
Most significantly, financial institutions are now being asked to take on a larger role, conducting mandatory anti-money laundering and background checks against Tier 1 Investor applicants who must now open a UK bank account prior to making their application for the investor visa. This in turn will necessitate the financial institution to carry out due diligence checks on the applicant prior to them entering the UK. In addition, financial institutions will be required to make a number of confirmations in writing in order for an application to be successful. If the applicant already has a UK bank account which meets the above specifications, he may rely on this account however the UK institution will still be required to acknowledge that the account was opened previously and will be used for the purpose of investing not less than £2,000,000 in the UK.
The updated Immigration Rules, introduced on 6 April 2015 apply retrospectively to all Tier 1 Investors that applied under the rules in place from 6 November 2014.
Maintaining the investment
Tier 1 (Investor) visa holders must be able to show that they have maintained a portfolio of qualifying investments for which they paid a total purchase price of at least £2, £5 or £10 million throughout the period of their leave. Requirements around the ‘maintenance’ of the investment were adjusted in November 2014, and again in April 2015, largely to clear up confusion around the earlier November changes.
The new rules state that when a qualifying investment is sold, whether at a loss or gain, the gross proceeds of the sale must be re-invested into a new qualifying investment before the end of the next reporting period, or within six months of the date of completion of sale, whichever is sooner. Accordingly, any additional costs incurred through this sale, such as stamp duty, must be paid from an additional investment “buffer” which is in place prior to the sale. The payment of these fees cannot be taken out of the £2,000,000 investment fund, even if it is subsequently “topped up”.
As gross proceeds of any sales must be re-invested, if part of the portfolio has previously been sold at a gain, then those proceeds would need to be re-invested, meaning the investment level would be more than £2,000,000. Equally, if the sale resulted in a loss, so long as the gross proceeds were reinvested, the total investment level would be under £2,000,000.
It is therefore very important that the transaction history and resulting portfolio values can be clearly tracked throughout the portfolio’s history.
The Investor may of course withdraw any interest or dividend payment generated by the qualifying investment from the portfolio. This is distinct from withdrawing funds from the qualifying investment, which must always be maintained.
The Immigration Health Surcharge (IHS) and Biometric Residence Permits for overseas applicants
In addition to the above, two new procedural requirements will apply to Tier 1 Investor applicants. Firstly, the UK government has imposed an Immigration Health Surcharge on migrants extending their leave to remain in the UK, or entering the UK, for six months or more. There are some exceptions to this, but it will apply to most of those applying for or extending the Tier 1 Investor leave. The surcharge is £200 per year (the fee payable will be the equivalent to the amount of time given on the visa) for the main applicant, and the same amount for dependants. The fee will entitle the migrant access to the same NHS services as a British citizen and will apply even where the migrant holds private medical insurance.
Secondly, overseas applicants for the Tier 1 Investor visa will be required to obtain a Biometric Residence Permit (BRP) as evidence of their right to live and work in the UK. Due to restrictions on distributing the BRPs overseas, visa applicants will receive a 30 day short term visa which will enable them to enter the UK within a specific period and pick up their BRP from a designated local UK Post Office. This requirement is being introduced around UK entry clearance posts in phases, with full rollout across the world expected by the summer of 2015.
Finally
Official statistics show that 1,173 visas were issued under the Tier 1 Investor category in 2014 according to government statistics released on 26 February 2015[2]. It remains to be seen what impact these changes, and the increase in the minimum investment threshold in particular, will have on the popularity of this respected investor programme.
[1] Pokhriyal v Secretary of State for the Home Department [2013] EWCA Civ 1568, Jackson LJ
