A call for reform and redesign of the UK’s Tier 1 Entrepreneur visa

31 July 2015

In March 2015, the Government commissioned the Migration Advisory Committee (the MAC) to review the Tier 1 (Entrepreneur) visa category. This followed a number of concerns about the benefits the route brings to the UK as well as fears over abuse of the route. We detailed the background to the Tier 1 Entrepreneur route and the most recent review in an earlier blog.

The MAC was specifically asked to consider:

  • Whether the requirement to show a set level of funds available for investment (currently £200,000 or £50,000) is a good way to determine entrepreneurial ability
  • Whether the existing eligibility and extension criteria are suitable for early stage business life cycles
  • Reconsidering the role angel investors and crowdfunding can play
  • Whether the route represents international best practice

In preparation for our response to the MAC consultation in June, we surveyed Tier 1 entrepreneurs, their advisers and interested parties and we hosted a round table with the MAC to debate the issues and ideas for reform of the route.

A case for reform

Our response made the case for reform of the route and the creation of a category which draws on international best practice and seeks to attract the best global entrepreneurial talent.

In summary, the reforms we proposed to make this a reality were as follows:

  • Ensure the rules are stable and do not retrospectively impact applicants - The current rules have been subject to a number of changes and ‘clarifications’ some of which have impacted on existing entrepreneurs and all of which have come into force with minimal or no notice. This creates an air of uncertainty for visa holders and their businesses. We proposed ensuring that any changes to a future route be consulted on well in advance, and that they do not have any retrospective effect. This should create an environment more conducive to successful businesses and will not deter future entrepreneurs who will know they can rely on the rules in place when they first apply.
  • Implement higher quality decision making through the use of specialist caseworkers - We looked at both utilisation of third party organisations, such as accelerators, and the creation of a team of highly specialised caseworkers with a sole focus on entrepreneur applications. As entrepreneur applicants have to submit business plans for assessment, we have encountered difficulties when caseworkers with limited business experience and knowledge review these. Using specialist caseworkers with a business background would ensure we were brining quality entrepreneurs to the UK by focussing on consistent and high quality decision making.
  • Allow greater flexibility regarding the specified required documents - If the caseworkers have specialist knowledge, they will be better placed to exercise discretion if an applicant is unable to provide documents from a restrictive list. For this reason, we also proposed greater flexibility and scope for discretion where an applicant doesn’t meet the requirements for an extension but can show good reasons for this.
  • Changing the culture and attitude towards entrepreneurs to one which is more welcoming and recognises the positive benefits they bring - The approach of other jurisdictions with successful programs has been to facilitate these types of applications as much as possible. This has been made possible through priority processing options, working with non-translated documents and helping introduce the successful applicants to local networks to help them start their businesses. We recommended the UK learn from these examples.
  • Changing the rules regarding the minimum funding levels - We noted that £200,000 is a higher level of investment then that required by other jurisdictions. There is also a requirement at the moment for funds to be invested in the applicant’s name. This fails to recognise how businesses are often funded, particularly with the rise of technology. This disregards the possibility of crowd funding, angel investors as well as venture capitalists and private equity. These investors would expect equity in the business and would expect the investment to be made in their name.  We also recommended following the New Zealand example where the funding requirement could be disregarded entirely if the applicant had an idea that was particularly innovative or of great benefit to the UK economy.

Redesigning the route

As well as suggesting these reforms, we also outlined a redesigned route, which included:

  • Relaxing the continuous residence requirement - This is the requirement that a Tier 1 Entrepreneur cannot be absent from the UK for more than 180 days in a 12 month period in the five years preceding their application for indefinite leave to remain. While we appreciate the Government does not wish to sever the link between established residence in the UK and indefinite leave to remain, we think there should be greater scope to exercise discretion where excessive travel has facilitated the UK business and greater trade links internationally.
  • Including regional variations of the route - In line with the Conservative Government’s manifesto pledge to build a ‘Northern Powerhouse’ we proposed including regional variations for the route with less stringent requirements where an entrepreneur wishes to establish a business in a more deprived area. Again this draws on international best practice.
  • Introducing a new route with three categories of entrepreneurs - recognising that they come from different backgrounds and different stages of life. The proposed categories included:
    • Graduate innovators  - This would be aimed at recent graduates who may lack business experience but have obtained a degree from a top business school or University in a subject relevant to their business idea. They would also get points for their business idea and may need to show access to a lower level of funding.
    • Established entrepreneurs - This would be aimed at entrepreneurs with a verifiable track record running their own businesses or working in the sector in which they plan to establish a business. They would also get points for their proposed business idea and may be expected to show a higher level of funding given they have already established successful businesses/careers.
    • Entrepreneurs seeking investment opportunities in the UK - This would be aimed at angel investors, individuals with a background in private investment looking to invest into an existing UK business and play an active role in that business. This would help facilitate much needed investment capital for UK businesses.

Outlook to the future of the Tier 1 Entrepreneur visa

We expect to be consulted further in the road testing of any proposed Rule changes and we are hopeful that our recommendations may be reflected in a newly redesigned entrepreneur route that enables the UK to attract the best innovators and investors without the current concerns of abuse.

Naturally, since the MAC was first tasked with the review of the Tier 1 Entrepreneur route, we have had a General Election and a change of Government, which has made controlling immigration and reducing net migration a top priority. The MAC has not yet presented their findings on this route and since the election, it has furthermore been asked to conduct two wide ranging and urgent reviews of Tier 2 of the Immigration Rules for non-EEA sponsored migrants. It is therefore not clear when to expect the MAC’s report on Tier 1 Entrepreneurs or the new Rules this inspires. It is possible changes could be expected in the October 2015 statement of changes, but in view of the new focus on Tier 2, these may be less wide ranging then initially intended. More wide ranging reform is definitely still on the cards but may take more time to come to fruition.

Whatever changes the Government seeks to make, we hope that these changes reflect a more positive and welcoming attitude to this important category of migrants, who play a part in establishing new business, innovation and employment in the UK. 

Further information

You may also be interested in reading some of our previous blogs relating to the Tier 1 Entrepreneur visa:

Should you have any questions regarding the Tier 1 Entrepeneur visa route or any other immigration issues, please contact Katie Newbury or a member of the immigration team.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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