Tier 1 Investor visa holders must invest at least £2 million in the UK within 3 months of their arrival in the UK. But investors should be aware that not all investments are permitted – and selecting the wrong form of investment will almost certainly jeopardise long term plans to settle in the UK. In this post we look at the qualifying UK Investor visa investment options for Tier 1 Investor visa applicants who wish to secure settlement in the UK by way of investment, as well as the forms of investment that are not permitted.

What are the qualifying UK Investor visa investment options?

Row 1 of Tables 8A and 9A of Appendix A to the Immigration Rules makes clear that in order to qualify for a Tier 1 Investor visa extension or Tier 1 Investor visa ILR, Tier 1 Investors who have applied to enter the UK Investor visa category from 6 November 2014 must have invested at least £2 million. However, the investment options available vary depending on whether the Investor applied under the Immigration Rules in force before or after 29 March 2019.

UK Investor visa investment options prior to 29 March 2019

For UK Investor visa holders who entered the Tier 1 Investor visa category under the rules in place between 6 November 2014 and 29 March 2019, an extension of stay or settlement will only be granted if they invested at least £2 million by way of purchase of UK Government bonds, share capital or loan capital in active and trading UK registered companies. An investment by way of loan capital would include a purchase of UK Corporate bonds.

UK Investor visa investment options since 29 March 2019

For UK Investor visa holders who entered the Tier 1 Investor visa category under the rules in place since 29 March 2019, an extension of stay or settlement will only be granted if they invested at least £2 million by way of purchase of share capital or loan capital in active and trading UK registered companies. Investments in UK Government bonds are no longer a qualifying investment option, although investments in UK Corporate bonds are still permitted.

What is an active and trading UK registered company?

Investors considering their UK Investor visa investment options should note that purchase of share capital and loan capital is only permitted in respect of ‘active and trading UK registered companies’. This means that the company must have its registered office or head office in the UK, a UK business bank account showing recent business transactions and be registered for UK corporation tax. Multinational companies with either a registered office or head office in the UK are acceptable. The company must also be doing business. The purchase of loan or share capital in a non-trading or dormant company would not be accepted as a UK Investor visa qualifying investment.

What forms of investment are not permitted on a Tier 1 Investor visa?

In addition to the restriction set out above, when considering UK Investor visa investment options, Tier 1 Investor visa applicants should note that paragraph 65 of Appendix A to the Immigration Rules provides an exhaustive list of investments that will not be accepted when applying for an extension of stay or settlement as a Tier 1 Investor.

Importantly, Tier 1 Investor visa holders are not permitted to invest in companies mainly engaged in property investment, property management or property development. As we discussed in our previous article ‘Can a Tier 1 Investor Invest In Property?’, this means that an investment in a company mainly engaged in investing in or developing property to increase the value of the property with a view to earning a return either through rent or a future sale, or both, will not qualify. Similarly, an investment in a company mainly engaged in the management of property for the purposes of renting it out, or resale, will not qualify. However, not all property-related investments are prohibited. The basic principle is that business income must be generated from the supply of goods and/or services and not derived from the increased value of property or any income generated through property, such as rent. Therefore, this restriction does not, for example, prevent a Tier 1 Investor from investing in company that is mainly involved in construction or, indeed, a hotel.

When looking at UK Investor visa investment options, Tier 1 Investor migrants should also be careful not to invest in an offshore company or trust or otherwise hold their investments offshore as such investments will not qualify for an extension of stay or settlement. The UK government does not regard investments from offshore companies as investment in the UK, at least in part because they do not deliver maximum tax benefit to the UK.

Individuals holding a Tier 1 Investor visa must also ensure that they do not invest their funds in open-ended investment companies, investment trust companies, investment syndicate companies (pooled resource / shared risk entities such as ‘namecos’ operating as part of a banking, underwriting or insurance syndicate, for example) or pooled investment vehicles.

The £2 million funds relied on to secure a Tier 1 Investor visa must also not be invested by using deposits with a bank, building society or other enterprise whose normal course of business includes the acceptance of deposits. The only exception to this is where the investment is made in bonds offered through National Savings & Investments (NS&I), which are a permitted UK Investor visa investment option.

UK Visas & Immigration will not approve applications for further leave to remain or indefinite leave to remain as a Tier 1 Investor that rely on leveraged investment funds, including the purchase of stocks or other investments by using borrowed funds (on margin). This is not one of the investment options for Tier 1 Investor visa holders. And, the Home Office will not accept applications that rely on money that a loan has been secured against, where another party would have a claim on the money if loan repayments were not met. This includes the scenario of a bank lending funds to a Tier 1 Investor and then taking the investments as security.

Conclusion on UK Investor visa investment options

The investment options for Tier 1 Investor visa applicants may be fairly limited, but this is because the original intention was to ensure that the category would bring the maximum economic benefit to the UK. Whilst the extent to which this original intention has been realised in practice is debatable, the UK Investor visa investment options for Tier 1 Investor visa holders who have entered, or are planning to enter the category now is clear – only a purchase of share capital or loan capital in active and trading UK registered companies will qualify for an extension of stay and settlement in the UK.