The Tier 1 (investor) route for high-net-worth individuals, allowing them to come to the UK if they invest a minimum of £1 million, has existed for over twenty years. On 25 February 2014 a report released by the Migration Advisory Committee (MAC), makes recommendations for changes to the existing requirements for potential investors with the stated purpose of bringing greater benefit to the UK economy.
In short, the main proposals in the report are:
- Raising the minimum investment threshold from £1million to £2 million;
- Relaxing the current restrictions on where investors can investso as to permit wider investment activity;
- Removing the "topping up" rule completely to allow for greater flexibility in investments;
- Removing the allowance of loans to fund the investment;
- Introducing an auction system for a limited number of "premium route" investor visas;
- Relaxing the residence requirements in the UK for investors who are using the premium route from 185 to 90 days per annum.
Our immigration lawyers have examined the recommendations for the Tier 1 (investor) visa:
Raising the minimum investment threshold from £1 million to £2 million
The minimum £1 million investment threshold has not been revised since introduction of the investor route in 1994. The Migration Advisory Committee recommends raising it in line with earnings growth since 1994, i.e. to £2 million. This probably the least unexpected recommendation of the report.
Relaxing current restrictions on permissible investment instruments so as to permit wider investment activity
Such approach, according to the report, would potentially be of a greater benefit to the UK economy rather than current limited pool of investments that investors have to choose from at present. Most investors tend to invest in UK Government gilts, which, according to the report, do not bring much real benefit to the UK. Therefore, infrastructure bonds, venture capital schemes, investment in start-up businesses are mentioned as possible new permitted types of investments as well as encouragement of investments in private companies rather than in publicly listed companies.
Removing the "topping up" rule completely for the Tier 1 (investor) visa
This proposal goes hand in hand with the widening of what investors can invest in. Currently investors have to monitor their portfolios every reporting period and if there is a shortfall below the required £1 million level, top it up by the next reporting period. If this is not done the investor is in breach of the conditions of his status, which could mean that the clock for his 5-year route to indefinite leave to remain could be restarted from 0 or, in severe cases, possibly even risking curtailment of their stay in the UK.
The proposed removal of the topping up requirement means that an investor would simply need to make the required investment at the point they obtain their immigration status in this category. Any decline in value due to market conditions will not require the investor to top it up.
This would be a very welcome change as the current requirements are inflexible and unfair on those who narrowly miss out on topping up in time.
It could also, as envisaged by the report, encourage investors to invest more widely moving away from concentrating all of the investments in Government bonds and publicly listed companies. However, it is also worth bearing in mind that investors currently prefer to invest in these because they are considered to be relatively safe and stable, therefore it remains to be seen whether it would work.
Removing the route where the investment funds are sourced by way of a loan
The Migration Advisory Committee suggests there is no evident benefit to the UK economy and therefore it is proposed to remove this route altogether. At present high-net-worth individuals could borrow the minimum £1 million necessary for the investor category from a UK financial institution if they own assets in excess of £2 million.
One of the proposals envisages the introduction of an auction system for a limited number of premium route visas with a reserve price set at £2.5 million. This would comprise of a £2 million investment like the standard route and a gift of £500,000 donated to the UK Government to go to a "specific good cause fund"; the same is proposed for any excess achieved above the reserve price. The investors on this route will get an accelerated settlement, i.e.indefinite leave to remain in the UK, after two years. It is proposed to introduce a quota of 100 visas for this route. Any successful bidders would still of course be subject to strict due diligence procedures.
This is probably the most controversial proposal of the report. As many immigration practitioners commented it would create an "ebay culture" for investor visas and leave bad aftertaste. At present, it is hard to predict how this route could be made functional in reality. Would preliminary due diligence checks be done on potential investors before the acceptance of the bids and auction taking place? And if so, how many investors would be willing to undergo these checks without the certainty of winning the bid or eventually obtaining the investor visa. They might as well prefer to go through a standard route of investing £2 million with no additional hassle of auction and uncertainty. Crucially, there are no proposals for accelerated citizenship, but only permanent residence after 2 years. The investor will still need to complete 5 years before he can apply for British citizenship.
We provided a response to the Migration Advisory Committee stating that "Most if not all clients...want to acquire British nationality." This is their ultimate goal and therefore it is hard to see how this route could attract them even with relaxed residence requirements for settlement, discussed below.
Relaxed residence requirements
A further proposal is to relax the residence requirement for investors who are using such premium routes from 185 to 90 days per annumin the UK. It is not clear whether this will be retrospectively applicable to the investors who chose the accelerated route to settlement currently available - based on £5 million and £10 million investment.
It certainly will be a welcome change for investors to relax these requirements as many of them have extensive business interests in various parts of the world and therefore required to travel frequently. However, this concession does not go far enough to make this route an attractive option for such investors. It will most probably have a very limited benefit for the investors because of the impossibility of them eventually acquiring British citizenship. There are no proposals in the report to relax residency requirements for citizenship applications. As such the investor who is on this route and is in the UK for 90 days per year, achieves accelerated indefinite leave to remain but when it comes to a British citizenship application the investor will still be required to demonstrate that he spent no more than 450 days outside the UK in the last 5 years (subject to a limited discretion). As such it is hard to see why any potential investors would find the premium route attractive, as it would not ease their route to acquiring citizenship.
The Migration Advisory Committee has now reported these recommendations to the government and so it remains to be seen whether and how they will eventually be implemented.