Back in November, we reported that the Government had asked the Migration Advisory Committee (‘MAC’) to review the Tier 1 (Investor) category of the Points Based System.
The MAC has recently published its report having considered evidence from numerous interested parties. Carter Thomas Solicitors acts for a number of individuals who have secured visas or who wish to secure visas under this category and we therefore spent a considerable amount of time explaining the various issues our clients face in a series of meetings with the MAC.
In its report, the MAC has focused on how the UK might benefit more from this category and they have considered the main motivations of those applying under it.
They have expressed particular concern about the £1 million investment threshold, which they consider to be too low, and the fact that the majority of applicants invest in UK Government bonds, which they have stressed are simply loans to the country (and are often withdrawn after five years) rather than direct long-term investment.
They have highlighted that, in general, the ultimate goal for investors is to obtain British citizenship with minimum risk to their investment and that there is little evidence that the UK benefits significantly from this category in its current form, largely unchanged since 1994.
The MAC’s recommendations for the reform of the route
The current rules require that a minimum amount of £750,000 of the £1 million must be invested either in share or loan capital in UK registered and trading companies or in Government bonds. These are commonly referred to as ‘specified investments’. The remaining balance can be invested in other ways – most commonly in residential property.
Currently the level of specified investments must be maintained at the minimum amount (i.e £750,000) until the investor secures Indefinite Leave to Remain (‘ILR), which also referred to as Permanent Residence. This means that investors who have invested in shares are required to top up the investment in the event those share prices fall.
Therefore, whilst the current rules do not prohibit investment in private companies, it is extremely difficult to ensure that the minimum investment level is both sustained and evidenced.
In addition, currently all investors must reside in the UK for at least 185 days per year if they wish to secure ILR.
The MAC has recommended that the rules are changed so that investment in private companies is encouraged. They have also suggested that the scope of permitted investment instruments should be widened to allow, for example, for investment in venture capital schemes, property development schemes with private or public developers, pooled investments, charitable donations, etc.
They have specifically recommended that:
- The minimum £1 million threshold be increased to £2 million.
- The current restrictions on permissible investment instruments are relaxed so as to permit wider investment activity.
- The topping up rule is removed which would, in turn, remove the requirement to produce quarterly valuations.
- The provision permitting the investment funds to be sourced by way of a loan is removed (as this is rarely used given the various conditions that must be met).
- That a new ‘Premium Route’ is introduced which we explore in more detail below.
The proposed Premium Route
Controversially, the MAC has recommended that there be a yearly auction of a limited number of Premium Route visas (around 100) issued to successful applicants who have submitted a single sealed bid over a reserve price of £2.5 million and who have passed strict due diligence checks. They propose that the residence requirement should be relaxed to 90 days per year from the current 185 days per year for such individuals.
They have recommended that £500,000 of the £2 million would be gifted to the UK Government for specific ‘good causes’ rather than general revenue for the Exchequer. The remaining £2 million would be invested pursuant to the new general investment rules. Where the bid is more than £2.5 million, the excess would also be put into a good causes fund.
Unfortunately the MAC has not recommended that there be an expedited route to British citizenship and we believe that this is a missed opportunity. Many of our investor clients would be willing to substantially increase the funds invested and even gifted to the UK in exchange for a quicker route to British citizenship. The MAC has also not recommended that family members should benefit from a relaxation on residence requirements and this is a further missed opportunity.
We very much hope that the Government will consider these issues when reviewing the scheme.
We do not consider that an auction system would be acceptable, given the Government’s stance on immigration, but on the whole we believe that many of the MAC’s recommendations, if implemented by the Government, could be extremely beneficial to many investors, especially those who wish to establish or invest in private UK businesses.
We also believe that there is scope for UK charities, including many of our university clients, and UK technology companies which again form a large part of our client base, to benefit from a well-considered revamp of this route which could see them directly benefit from investments that are made by individuals who wish to enter the UK as Tier 1 (Investors) in the future.
Action for prospective investors
We recommended in November that those who are thinking of making an application under the Tier 1 (Investor) category consider these developments carefully.
Individuals who are keen to apply for Tier 1 (Investor) status under the current structure and who specifically wish to invest £750,000 in UK Government bonds should consider filing their application in the very near future.
We will update our website when further details emerge. If you require further information about the current criteria for Tier 1 (Investor), please contact us.