Tier 1 Investor - changes
25 November 2019
Some readers may remember that fateful day on 6 November 2014 when the minimum investment for Tier 1 Investors increased from £1 million to £2 million.
The Home Office decided on this change after having commissioned a report by the Migration Advisory Committee (MAC) on the Tier 1 Investor route. The question MAC faced was: Does this visa route offer significant economic benefits to the UK?
Near the beginning of the report they stated that they were going to bring some "healthy scepticism" to bear on the subject, so we knew that something interesting was in store.
The report stated that the £1 million investment figure was "probably too low" and that it had not been raised since 1994 (when the predecessor Investor visa was in place). They suggested £2 million and, as we know, this was accepted by the Home Office.
And the "healthy scepticism" emerged quite strongly: "We are sceptical that the route, as currently constituted, does deliver significant economic benefits, though recognise that there is some gain to UK residents."
The main problem was, in the eyes of MAC, that the route as it was constituted at the time permitted investment in British companies or in UK Government bonds, and the latter was more popular. There was not, they said, any real economic benefit in investment in Government bonds, which was effectively a loan to the Government from the investor. But it did not really help the Government, because if loans were not available from investors they would easily be able to borrow the funds from elsewhere.
As those on Tier 1 Investor visas will know, that recommendation was also apparently taken seriously by the Home Office, and investing in UK Government bonds was eventually prohibited, but not until March 2019. Investment for Tier 1 Investors is now only possible in British companies.
Investment in such companies can be made via share capital or loan capital, which of course raises the interesting question of why a loan to the Government is bad but a loan to a private company is good? Well, the answer to this must be that private companies ask for loans when they want to expand their operations and make targeted investment in pursuance of that. This is something that must be eminently beneficial to the UK economy, and hence the distinction.
In any event, on 6 November 2014 the Home Office generously decided the make transitional arrangements for those Tier 1 Investors who were already in the system and who were relying on investments of £1 million. They were able to either extend their visas or apply for settlement when the time came, after five years, and they would not have to worry about the new rules.
But some such investors may have got themselves caught in a bit of a trap. Those who did not want to or were not able to apply for settlement (because they did not meet all the relevant requirements) were able to apply again for a visa extension when their visa expiry was due. There was no rule against it.
But now the Home Office has "called time" on this. One million pound Tier 1 Investors are now facing deadlines. They will either have to find a way of meeting the rules for settlement or, alternatively, switch their investment to a minimum £2 million pound investment.
There are several possible reasons for failing to meet the requirements for settlement, including but not limited to failure to pass the English language/Life in the UK test requirements and failure to have stayed in the UK long enough - ie having been outside the UK for more than 180 days per 12 months.
Like most things to do with the Home Office the new rules are quite complex. There is a deadline in April 2020 for extension applications and a deadline in April 2022 for settlement applications. And then there are further deadlines for those whose investment still includes Government bonds - but this is not likely to be so problematic, because investors are entitled to switch their investments as long as there is continuous investment.
So it hardly needs to be said that those Tier 1 Investors who are relying on an investment of £1 million need to get good legal advice and decide what they want to do. At Garth Coates Solicitors we have plenty of experience in this area.