New rules for investors and entrepreneurs will mean a faster route to permanent residence

In November 2010 the Home Secretary announced that although the tier 1 (general) route will be closed as part of the policy drive to reduce net migration to the UK, tier 1 (investor) and tier 1 (entrepreneur) routes will be reformed to make them more attractive and encourage more applicants. Tier 1 (entrepreneur) and tier 1 (investor) routes will not be subject to a limit on numbers.

In addition a new tier 1 route for persons of exceptional talent will be introduced. This will cover migrants who have won international recognition in scientific and cultural fields, or who show sufficient exceptional promise to be awarded such recognition in the future. This category will be subject to a limit of 1,000 places.

How will this affect you?

We have been advising the UK Border Agency (UKBA) on these changes to tier 1 (investor) and tier 1 (entrepreneur) routes. We have taken this opportunity to argue a number of issues, including that the residence requirements are unrealistic – currently investors are allowed to be out of the country for only 90 days a year.

No formal announcement is expected until the end of February/early March but two themes have emerged from our discussions, although they are still not yet finalised:

  • investors and entrepreneurs will be able to spend up to 180 days a year outside the UK. This willgive much greater flexibility but they will remain resident for UK tax purposes.
  • accelerated route to permanent residence depending on, for investors, how much is invested and, for entrepreneurs, how successful the business is.

The current proposals for investors are that those investing £5 million will be eligible for permanent residence after three years and those investing £10 million will be eligible after two years. Entrepreneurs will become eligible after three years if they have created ten jobs, or achieved turnover of £5 million.

The UKBA is also contemplating lowering the entry level investment by entrepreneurs for innovative start-ups from £200,000 to £50,000. As a further encouragement, entrepreneurs may be able to bring trusted employees with them for up to 12 months – the number (up to four) will depend on the planned level of investment eg one employee for £200,000 and four employees for £1 million.

Will this affect eligibility for British citizenship?

Significantly, the UKBA has said that they do not propose to make any changes to the requirements for naturalisation as a British citizen. These will remain as they currently are, usually requiring five years residence in the UK and one additional year with permanent residence status. The permitted absences for citizenship applications will not be aligned with the proposed more generous permitted absences for investors and entrepreneurs. Those investors and entrepreneurs who wish to become eligible for British citizenship will therefore need to be careful about taking full advantage of the generous proposed regime of permitted absences.

We are developing tax and investment strategies to take advantage of the opportunities that these changes will bring and also how to optimise travel patterns to enhance prospects for successful applications for British citizenship.