On the 25 February 2015, the UK Government announced changes to the UK Immigration Rules, the majority of which are due to come into effect on 6 April 2015. The changes which will most affect high-net-worth individuals relate to amendments being made to the Tier 1 (Investor), Tier 1 (Entrepreneur), Parent of a Child at School, Visitor and Overseas Domestic Worker categories. In addition, the Home Office is continuing its phased roll out of Administrative Review so that, by 6 April 2015, it will be available for all applications, with the exception of visitors and short term students. This effectively means that, after 5 April 2015, it will no longer be possible to pursue a formal appeal through the court system if an immigration application is refused.
TIER 1 (INVESTOR)
Although the Home Office only made changes to the Tier 1 (Investor) category in November 2014, it has been required to make further amendments due to some unintended consequences which arose from the 6 November changes and made the rules unworkable in practice. Macfarlanes was at the forefront of working with the Home Office to address these issues and proposed changes to the Immigration Rules which make the category more attractive to high-net-worth individuals. The Home Office has also taken the opportunity to introduce further changes to the category which it has been considering for some time.
- Prospective Tier 1 (Investor) migrants must now open a UK-regulated bank account before submitting their application. It is important to note that whilst the Explanatory Memorandum attached to the Statement of Changes in Immigration Rules states that those applying under the Tier 1 (Investor) category will be required to open a UKregulated investment account, the actual Immigration Rules only require the opening of a UK-regulated bank account. The Home Office has confirmed to us that this is the correct interpretation as the aim of this requirement is to ensure UK banks carry out due diligence checks before the prospective investor submits their application.
- The minimum age of Tier 1 (Investor) applicants is being increased from 16 to 18.
- Further clarification on the restriction on investing in companies principally concerned with property investment, property development or property management to bring it in line with the restriction set out in the Tier 1 (Entrepreneur) Immigration Rules.
- A requirement is being introduced that all the capital must be maintained within the portfolio. In other words, once the Tier 1 (Investor) has purchased their initial £2m (or £5m or £10m, as appropriate) of qualifying investments, all of the capital will have to remain invested for the duration of the Tier 1 (Investor) migrant’s stay in the UK.
- If an investment is sold at a loss, the Home Office is removing the requirement that a new investment must be bought at the original purchase price of the investment being sold. Instead, the Tier 1 (Investor) will only be required to purchase a new investment at the price at which the investment was sold. If an investment is sold at a gain, the Tier 1 (Investor) will be required to purchase a new investment, again, at the price at which the investment is being sold. In other words, they will be required to reinvest the gains in a permitted investment within the Tier 1 (Investor) portfolio and will not be able to extract the profit from the portfolio.
- Where an investment is sold, the Tier 1 (Investor) will have until the end of the next reporting period, or six months, whichever is sooner, to buy a new qualifying investment.
- It will not be possible for capital to be used to pay any fees charged by an institution to manage the portfolio or any transaction costs or tax incurred through the buying and selling of investments, if these charges will deplete the initial investment below the relevant investment level. However, if a Tier 1 (Investor) invests more than £2m (or £5m or £10m, as appropriate), it will be possible for the charges to be paid from the surplus investment, providing the surplus was invested on or before the date the charges were incurred. For example, if the Tier 1 (Investor) wishes to meet the £2m threshold but has actually invested £2.1m, up to £100,000 of charges will be able to be paid from the investment funds.
- Tier 1 (Investor) migrants will be permitted to remove any income generated from the portfolio, such as interest or dividend payments.
There are also a number of other minor changes including:
- additional requirements in relation to evidencing source of funds where the source is not a bank account in the applicant’s name where the required funds have been held for the specified 90 day period; and
- changes to the information which must be included in the investment portfolio reports which must be provided for by individuals who are applying either to extend their stay as a Tier 1 (Investor) or for indefinite leave to remain (also known as permanent residence and settlement) on the basis of time spent in the UK as a Tier 1 (Investor).
TIER 1 (ENTREPRENEUR)
A number of minor changes are being made to the Tier 1 (Entrepreneur) route, which include:
- A new “genuineness test” is being introduced for extension and indefinite leave to remain applications, similar to the “genuine entrepreneur test” which must be met for initial applications.
- Applicants will have to evidence the third party source of the required funds if they have held the funds for less than 90 days before the date of the initial application.
- A new requirement is being introduced for applicants to submit a business plan with the application. Previously this was a non-mandatory document which could be requested.
Arguably the biggest change being introduced is a fundamental redesign of the visitor category. This is part of the Home Office’s intention to introduce a new structure and style to all the Immigration Rules. This means moving from Immigration Rules which relate to a particular route being split over several different sections to a situation where all the Immigration Rules relating to a particular category can be found in a single section.
The intention is that, except in some specific instances, some of which are mentioned below, these structural changes should mean that there is no difference between the activities that someone entering the UK under the redesigned visitor routes will be able undertake as compared to those that an individual can undertake under the current structure.
There are currently 15 different visitor routes set out in the Immigration Rules. The Home Office intends to reduce these to just 4 routes:
- Visitor (Standard) – this will consolidate the general, business, child, sport, entertainer, visitors for private medical treatment, visitors under the Approved Destination Status Agreement with China, prospective entrepreneur and visitors undertaking clinical attachments, the Professional and Linguistic Assessment Board test and the Objective Structured Clinical Examination. This will mean that those entering the UK under the visitor (standard) route will be able to undertake a range of activities under a single category where they had previously been required to apply for entry under separate categories.
- Visitor for marriage or civil partnerships.
- Visitor for permitted paid engagements.
- Transit visitor.
No changes are being made to the structure of the last three routes.
The student and extended student visitor routes are being rebranded into a short term study routes and the parent of a child at school route is being rebranded as a parent of a Tier 4 (child) student.
In relation to the business activities that a Visitor (Standard) may undertake in the UK, the Home Office has sought to clarify what it considers to constitute “work” and has also extended the list of permitted activities to address gaps in the system, namely:
- allowing visitors to carry out incidental unpaid volunteering for up to 30 days at a UK registered charity;
- allowing overseas trainers to deliver training to UK based employees of a multinational company, where the training is part of a contract to deliver global training to the international corporate group;
- allowing UK based organisations, who are not corporate entities, to provide training to overseas visitors on work practices and techniques that are needed for their employment overseas, where this is not readily available in their home country; and
- expanding the existing provision to allow overseas lawyers to advise a UK client on international transactions and litigation, provided they remain paid and employed overseas.
A further clarification has been made to confirm that, where a Visitor (Standard) is in the UK on behalf of their overseas employer as part of that employer’s contract to provide services to a UK company, and the majority of contract work is carried out overseas, the employer may bill the UK client for the time the Visitor (Standard) has spent in the UK. However, it is important to note that, even though the overseas employer is permitted to charge for the time spent in the UK, the Visitor (Standard) may still only undertake the permitted activities in the UK.
OVERSEAS DOMESTIC WORKERS
The Immigration Rules are being amended to require a worker entering the UK under this category to be paid in accordance with the National Minimum Wage Regulations. In addition, a requirement is being added to prevent employers using an exemption that was designed for au pairs which allows employers to decline to pay the Minimum Wage to those living as part of the family.
The main effect of Section 15 of the Immigration Act 2014 was to remove the right of appeal for all immigration refusal decisions and to replace it with a system of administrative review. The Government agreed to a phased roll out of administrative review and these new Rules confirm that this roll out will be completed on 6 April 2015. From this date, administrative review will be the only process available to correct case working errors in certain decisions where there is no right of appeal. This effectively means that, after 5 April 2015, it will no longer be possible to pursue a formal appeal through the court system if an application is refused. It is important to note that it is not possible to appeal or request an administrative review of a decision to refuse a visitor or short term student application. Those who have had applications refused under these routes should, instead, submit fresh applications which address the reasons for refusal.
With the exception of the redesign of the visitor route, these changes represent a general tightening of the Immigration Rules to prevent perceived abuse and an attempt to address the unintended consequences of previous changes to the Immigration Rules. Although the intention is that, in the main, the change in the structure of the visitor route should not lead to a substantive change in the activities that visitors may undertake in the UK, it is inevitable that the redrafting will lead to some changes in interpretation. However, it will take some time before the full effect of this redrafting will be known.
The changes to the Tier 1 (Investor) category should make the route more attractive to high-net-worth individuals and be effective in encouraging them to invest in a wider range of investments.
Many will be disappointed to see that the right of appeal has now effectively been withdrawn for all immigration refusal decisions, although some decisions will still be able to be challenged by way of judicial review. It will therefore be interesting to see how effective the administrative review process is in addressing situations where the Home Office has made an error in the processing of an application which has led to a refusal.