The past few weeks have seen a number of announcements and recommendations relating to Tier 1 (Investor) visas. Below is a summary of the current situation and the factors at play.
The Current Tier 1 (Investor) visa
The current Tier 1 (Investor) scheme allows applicants to obtain a visa to the UK provided they can demonstrate that they have a minimum £1 million of their own funds or funds which have been loaned to them by a UK registered financial institution. They are then required to invest a minimum of 75% of these funds in UK government bonds (otherwise known as gilts) or loan or share capital in UK registered trading companies.
The Migration Advisory Committee report
Last year, The Migration Advisory Committee (MAC), the Home Office’s independent migration advisor, was asked to advise on whether the current investment thresholds for the Tier 1 (Investor) visas were appropriate to deliver significant economic benefit to the UK. The MAC published its report on 25 February 2014.
In considering the question from the Government, the MAC looked into the current scheme and its disincentives, the benefits to the UK of this route, the factors affecting these benefits, and investors' motivation for investing in the UK.
Following its assessment of these various factors, the MAC has made the following recommendations:
- To raise the minimum threshold to £2 million. The MAC highlights that the current threshold of £1 million has been in place since 1994.
- To permit wider investment activity beyond investments in UK government bonds or loan or share capital in UK registered and trading companies.
- To remove the topping up rule. This would mean that investors would no longer be required to invest additional funds if the value of their original investment falls. To avoid this problem, investors usually buy government bonds, which they perceive to be the most stable investment. However, the MAC found that this type of investment is akin to a loan which can be returned to the investor at the end of the period of their visa and is therefore of little benefit to the UK.
- To remove the provision permitting investment funds to be sourced by way of a loan from a UK registered financial institution. The MAC found that this provision is hardly used because it is difficult to rely on overseas assets as security for the loan.
- To introduce a premium route which will replace the higher thresholds of investment of £5 million and £10 million and will lead to accelerated settlement within two years. The threshold will be a minimum of £2.5 million. However, the number of visas under the premium route will be limited to 100 per annum and allocated using some kind of auction.
- To reduce the “residence requirement” for the premium route. Investors applying for indefinite leave to remain after having spent five years (or three or two years if investing £10 million or £5 million respectively) must have spent at least 185 days in any year while they held the Tier 1 (Investor) visa. The proposal is to reduce this to 90 days for those applying under the premium route.
To compare the current scheme to that proposed by the MAC, click here.
Following publication of the MAC’s recommendations, many press articles ran with headlines such as ‘UK auctions investor visas’ and ‘visas to be auctioned off to wealthy foreigners’. Many articles failed to mention that the MAC’s report only contained recommendations. The Government has yet to respond to these and it remains be seen whether there is the political appetite to adopt or pursue any of the MAC’s recommendations.
The Home Affairs Select Committee recommendations
In March 2014, following on from the MAC report, The Home Affairs Select Committee (a Committee appointed by the House of Commons to examine the Home Office) recommended the immediate suspension of the Tier 1 (Investor) visa category while the Government considered the options for reform. Commenting on the MAC’s report on investor visas, the Select Committee expressed its “alarm” about the purported “purchase of gilts for citizenship” and suggested that the investor visa route brings very little benefit to the UK.
It is understood that any suspension could be introduced without notice. No new applications are considered when a category is suspended. But it should be noted that suspensions of visa categories/applications are usually seen in instances where there is evidence of abuse. Whether investor funds actually benefit the UK is a very different argument to the category being abused. Suspension would be an extreme measure especially where there has been little or no evidence of actual abuse.
Following the comments made by the Select Committee, there were reports on the possible suspension of the investor visa and many urged potential investors to submit their application as soon as possible to ensure that they could still benefit from the minimum £1 million investment criteria.
Statement of Changes in the Immigration rules
Despite the MAC report and the Home Office Select Committees recommendations, the subsequent Statement of Changes in the immigration rules, which came into effect on the 6 April 2014, did not bring about sweeping changes to the Tier 1 Investor category.
From 6 April 2014, the following changes apply:
- a new provision allowing migrants to make their investment outside the normal three month time limit where there are exceptionally compelling reasons which were unforeseeable and outside the migrant’s control (although investors who do not invest within the first three months may still have their leave curtailed and will have to wait for longer before they become eligible to apply for settlement)
- minor changes to the documentary requirements for accounts, where these are required
- introduction of a minimum age of 16 years for Tier 1 (Investor) applicants, together with the need for parental support for applicants aged under 18.
The minimum investment for Tier 1 Investors remains at £1 million and the route has not been suspended. The scheme has recently received significant press attention but the Government is yet to make an announcement on any rule changes. The MAC identified that one of the factors influencing investors' decision to come to the UK is stability. However, the mixed messages that the UK is sending out may mean that investors opt to go to other countries with more attractive investor schemes.
To see how the UK compares with other countries, we have digested the figures provided by the MAC and summarised this in the attached table.