Associate Ruth Jowett considers two recent cases that highlight the care those applying to remain under the Tier 1 (Entrepreneur) route must take when preparing for an extension or ILR application.
The Tier 1 (Entrepreneur) route closed to new applicants on 29 March 2019 and has been replaced (in theory) by the new Innovator and Start-up routes. Individuals who have been granted permission to stay in the UK under this category are still able to apply for an extension of stay until 5 April 2021, and to apply for Indefinite Leave to Remain (‘ILR’) until 5 April 2025.
In Sajjad, R (on the application of) v The Secretary of State for the Home Department  EWCA Civ 720 and Khajuria, R (on the application of) v The Secretary of State for the Home Department  EWHC 1226 (Admin), the courts explored the rules around such applications.
Tier 1 (Entrepreneur) Extension Rules
Those who obtained Entry Clearance from abroad under Tier 1 (Entrepreneur) were initially granted three years and four months leave and those who applied to switch into this category from inside the UK obtained three years leave to remain. Before their leave expires, individuals should apply to extend their leave for a further two years with the view to obtaining ILR after having spent five years in the UK under this category. Some may use an accelerated route to apply for ILR earlier than this.
In order to extend their leave to remain under this route, an applicant must meet a number of strict requirements, including:
- to have formally registered as a director of a business or as a self-employed person within 6 months of either entering the UK or being granted permission to stay in the UK under Tier 1 (Entrepreneur);
- to have created at least two full time jobs that have existed for at least 12 months;
- to have invested the required funds into the business or businesses in the UK; and
- to be able to demonstrate that they continue to be a genuine entrepreneur.
The cases demonstrate how inflexible and strict the Home Office’s approach is when assessing if these requirements have been met.
Sajjad – Investment of required funds
In April 2019 the Court of Appeal heard the appeal from Mr Sajjad against the refusal of permission to apply for Judicial Review.
Mr Sajjad had applied to extend his Tier 1 (Entrepreneur) leave, and his application was refused on account of the way in which he had invested funds. He had transferred well over £200,000 from his personal account to his UK company and his accountant provided a supporting letter for the application, which stated that the funds had been transferred by way of director’s loan.
Home Office Guidance suggests that there are three ways in which an entrepreneur may make an acceptable investment:
- direct cash investment;
- share capital; and
- a director’s loan.
However, the Secretary of State argued that there were only two types of investment that would be acceptable:
- investment by way of purchase of share capital; and
- a director’s loan.
If making an investment by way of director’s loan, which Mr Sajjad was found to have done, a loan agreement containing specific information must be supplied. This must include details of the nature of the loan and confirmation that it is unsecured and subordinated in favour of third party creditors. His application was refused as Mr Sajjad had not supplied a director’s loan agreement containing all of the required information.
Mr Sajjad had essentially invested his money in a way that made the most sense to him from a business perspective. He had paid money into the company account and paid the company’s creditors when it was required. His investment was, however, considered a director’s loan for the purpose of his leave application, as the company had an obligation to repay the funds.
It is therefore essential, that entrepreneurs not only consider how they invest their money from a business perspective, but also from an immigration perspective. It may be preferable from a business perspective to inject cash into different aspects of the business when necessary, but an applicant must be certain that the injection of cash will meet the requirements of a director’s loan, and that they are able to provide the required documents when it comes to extending their leave.
Khajuria – Job Creation
The case of Khajuria was a Judicial Review brought against the Secretary of State for the Home Department (SSHD) following the refusal of a Tier 1 (Entrepreneur) extension application.
A Tier 1 (Entrepreneur) applicant must demonstrate that they have created the equivalent of at least two full-time jobs for settled workers during their most recent period of leave. We considered this requirement in more detail here.
Ms Khajuria’s application was refused on the basis that she had not provided correct payroll documents in support of her application; she had failed to produce real time information (‘RTI’) submissions made to the Revenue and Customs Commissioners.
Ms Khajuria had created the relevant positions through a number of part-time roles. Because of the nature of the roles she created, from a business perspective, she was not required to operate a PAYE system that required her to make RTI submissions. However, the Home Office showed no discretion in making its decision to refuse Ms Khajuria’s application, despite her specific circumstances.
The High Court judge explained that:
“the system operates in such a way as to allow officials in the department to essentially ‘tick boxes’ in relation to any application and if a box cannot be ticked… then to reject the application”.
This demonstrates how rigidly the rules are applied and should be taken as a warning to all those considering making an application to extend their Tier 1 (Entrepreneur) leave in the future. Entrepreneurs must consider the requirements relevant to the roles they create, but also the specified evidence that must be provided for an application and proceed accordingly, even where following such a process would not be their preferred way to run their business.
What can be learnt
Both cases demonstrate the rigidity and strictness with which the Home Office apply the Immigration Rules to applications to extend leave under Tier 1 (Entrepreneur). The Immigration Rules are not necessarily compliant with how an entrepreneur would prefer to run their business. However, it is imperative that these rules are considered and adhered to throughout the period of initial leave to remain in the UK. The Points Based System provides very little room for flexibility and an application that does not meet the precise requirements is at risk of being refused. Care must be taken well in advance of making an application in order to avoid such risks.
How we can assist
We maintain a 100% success record in assisting applicants to apply for an extension of stay or Indefinite Leave to Remain under the Tier 1 Entrepreneur category because we take an extremely thorough approach to preparing our client’s applications. If you would like to discuss the requirements for this category or need assistance with an application, please contact us.