This note outlines the types of investments that do and do not qualify under the Tier 1 (Investor) immigration category.
Our accompanying note "Tier 1 (Investor) visa" outlines the requirements of the Tier 1 (Investor) category.
Investments that qualify
- The applicant must have a minimum of £2m (sterling) available to invest in the UK.
- The funds must be invested in the UK at all times in qualifying investments, which include:
- UK Government Bonds; or
- share capital or loan capital in active and trading UK registered companies, other than those principally engaged in property investment, property management or property development.
- Tier 1 (Investor) migrants have the option of investing more than £2m and reaching certain higher thresholds will result in a quicker route to indefinite leave to remain (ILR) (also known as permanent residence or settlement).
- Investments against which loans have been taken out or investments that are held in non-UK custody accounts are not permitted.
- An “active and trading UK registered company” means a trading company that is doing business, not a dormant or non-trading company. It must have its registered office or head office in the UK. The company must have a UK business bank account showing current transactions and be subject to UK taxation. Multinational companies with either a registered office or a head office in the UK are acceptable.
All the capital that forms part of the initial investment must remain invested while the applicant is in the UK under the Tier 1 (Investor) category. That is, once the Tier 1 (Investor) migrant has purchased their initial £2m (or £5m or £10m) of qualifying investments, all of the capital must 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 Tier 1 (Investor) migrant must 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) migrant must, again, purchase a new investment at the price at which the investment is being sold.
So, for example, if the Tier 1 (Investor) migrant buys an investment within the £2m portfolio for £100,000, but when it is sold it is only worth £85,000, a new qualifying investment must be bought for at least £85,000. Equally, if the value of the £100,000 investment has increased to £115,000 by the time it is sold, a new qualifying investment must be bought for at least £115,000.
When an investment is sold, a new qualifying investment must be bought either by the end of the next reporting period, or within six months, whichever is sooner.
Tier 1 (Investor) migrants are only permitted to remove interest accrued and dividends declared after the date on which they purchased the qualifying investment.
Invested capital cannot be used to pay any portfolio management fees, transaction costs or tax incurred through the buying and selling of investments, if these charges will deplete the investment below the initial investment level. However, if more than £2m (or £5m or £10m, as appropriate) is invested, it will be possible for the charges to be paid from the surplus, providing the surplus was invested on or before the date the charges were incurred.
For example, if the Tier 1 (Investor) migrant wishes to meet the £2m threshold and has invested £2.1m, up to £0.1m of charges (e.g. management fees, transaction costs, tax, etc.) may be paid from the investment funds, irrespective of the market value of the funds.
Investments that will not be counted
- Funds invested via an offshore company or trust.
- Funds invested in open-ended investment companies, investment trust companies or pooled investment vehicles, because ultimately the underlying investments cannot be guaranteed to be in the UK.
- Funds invested in companies mainly engaged in property investment, property management or property development. Note that this category includes companies whose objective is to earn a return through rental income. However, investment in construction firms, manufacturers or retailers who own their own premises would be counted.
- The funds cannot be solely invested by using deposits with a bank, building society or other enterprise whose normal course of business includes the acceptance of deposits.
- ISAs, premium bonds and saving certificates issued by the National Savings and Investment Agency.
- UK Visas and Immigration will not approve applications that rely on leveraged investment funds – the funds used will not be accepted as the Tier 1 (Investor) migrant’s own funds.
The Tier 1 (Investor) requirements are complex and, therefore, it is important that the applicant, and their wealth manager (if they are using one), are familiar with the Immigration Rules in relation to the investment requirements.
Unfortunately if a mistake is made with the investment, which, in our experience, is happening increasingly often, the applicant may find themselves in breach of the Immigration Rules. If an applicant does find themselves in breach, there is no mechanism within the Immigration Rules which allows applicants to correct the error and “wipe the slate clean”. In these situations, applicants will need to wait until they apply to extend their stay or for ILR to request that the Home Office exercises its discretion and approves the application.