This note outlines the types of investments that do and do not qualify under the Tier 1 (Investor) immigration category.

Our accompanying note “UK Investor Visa Rules” outlines the requirements for applications to enter the UK or to extend current investor visas. The UK Government has made changes to the category, which came into effect on 6 April 2015, which are reflected in this note.

Investments that qualify

  • You 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.
  • In practice, you have the option of investing more than £2m and reaching certain higher thresholds carries advantages.
  • You must invest in the UK by way of:
    • UK Government Bonds; or
    • share capital or loan capital in active and trading UK registered companies, other than those principally engaged in property investment.
  • 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 in the UK, or its head office in the UK. The company must have a UK business bank account showing current transactions and be subject to UK taxation. Multi-national companies with either a registered office or a head office in the UK are acceptable.

A new requirement has been introduced from 6 April 2015 that all the capital invested must be maintained in the investment portfolio. That is, once the Tier 1 (Investor) has purchased their initial £2m (or £5m or £10m) 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 Tier 1 (Investor) 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) must, again, purchase a new investment at the price at which the investment is being sold.

So, for example, if you buy 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 £85,000. Equally, if the value of the £100,000 investment increased to £115,000 when it is sold, a new qualifying investment must be bought for £115,000.

When you sell an investment, you have until the end of the next reporting period, or six months, whichever is sooner, to buy a new qualifying investment.

Those who applied under the Tier 1 (Investor) route from 6 November 2014 must demonstrate that they complied with this requirement at the extension stage, even though it was only introduced on 6 April 2015. If you have been running your portfolio in a way that complied with the old requirements, but is in breach of those coming into effect from 6 April 2015, you should seek legal advice as soon as possible.

Tier 1 (Investor) migrants are permitted to remove any income generated from the portfolio, such as interest or dividend payments.

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 initial 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) wishes to meet the £2m threshold and has invested £2.1m, up to £0.1m of charges 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 your own funds.

Bearing in mind the vagaries of investment performance, many applicants choose to invest 100 per cent of their chosen investment (£2m, £5m or £10m) in UK gilts. You must check for fluctuations in the value of your investments and if you do sell any of the investments, you must be prepared to purchase a new qualifying investment at the price that the old investment was sold, before the end of the next reporting period or within six months, whichever is the shorter.