The UK Immigration Minister Caroline Nokes last night announced that the Tier 1 (Investor) visa scheme would be temporarily suspended from midnight on Thursday 6 December 2018 to enable a comprehensive review of the current rules to be completed.
Changes will be made to ensure greater scrutiny of the sources of funds of those applying under the scheme, as well as changes to the qualifying investments for future applicants to generate greater benefits for the UK economy.
What does this mean for existing Tier 1 Investors already in the UK?
The suspension of the scheme does not affect those already in the UK with Investor visas. However, there is still a risk that some of those already here, particularly those arriving before 2015, may be requested to confirm the source of their Investor funds. Any clients or advisers concerned about this should contact us.
Investors already here under the scheme will not need to change their investment portfolios. Changes to permitted acceptable investments (see below) will only affect those coming in under the new rules.
What does this mean for those planning to come to the UK under the Tier 1 (Investor) scheme?
A number of families will have made plans to relocate to the UK in time for the start on the 2019-20 academic year in September 2019. Many will be looking at UK schools and priorities in preparation for their move.
Those wishing to apply as Investors are required to provide a letter from a UK bank or wealth manager confirming they have opened a UK investment account, a letter from the bank holding their funds, and police certificates before they can apply. In the event these are in place (or can be produced before midnight UK time Thursday 6 December) an online application should be made immediately.
When will the Tier 1 Investor route be re-opened?
For those who are not in a position to apply now, it is likely that the review will take some months to complete. Immigration rule changes are usually made in April and November of each year. We are hopeful that the changes will be completed in time for the April 2019 rule changes to enable families to obtain their visa in advance of the summer of 2019. We will be seeking to ensure that any review is completed as early as possible.
What will the new comprehensive audit requirements mean for future Tier 1 Investor applicants?
The announcement states that applicants will have to provide “comprehensive audits” of “all of their financial and business interests”. It is likely that the scope of these audits will be broad ranging, will cover sources of overall wealth and sources of the specific investment funds and will require disclosure of extensive financial information going back over a number of years.
All of our clients are already providing this information as part of the on-boarding and Anti Money Laundering (AML) procedures with the UK banks and wealth managers they have chosen to run their investment portfolios. However, the new rules will require these audits to be completed by “suitably regulated UK auditing firms” who are not involved in managing the investments or assisting with the visa application. We take this to mean UK accountancy firms regulated by their relevant professional bodies.
What are the new requirements on what funds can be used to show the minimum £2m investment?
The announcement also indicates that an investor will need to demonstrate that they have had “control” of the investment funds for at least two years. While no details have been given as to what “control” means, we anticipate that this will mean that the investor (or their spouse or partner if applying on the basis of joint funds) has owned the funds (or the assets such as property or investments from which the funds are derived) for that period.
It is unclear whether gifts or funds derived from company dividends, divorces or lottery wins, all of which are permitted at present, would still be allowed. Our view is that as gifts are common in Investor applications, they should be permitted under the new rules, possibly with a comprehensive audit undertaken for the donor of the fund. Again, most UK banks and wealth managers require this information at present.
What changes will be made to the types of acceptable investments of Tier 1 Investors?
Many Tier 1 Investors have previously chosen to invest in UK Government bonds. Many banks and wealth managers do not wish to manage discretionary portfolios, as the rules on managing these investments have become more complex.
Changes are also proposed to the types of investments which will be acceptable. Investment in Government bonds will no longer be accepted for those entering the UK in the future under the new rules. In addition, the Government intends to strengthen “the rules to ensure investments are made in active and trading UK companies”. We understand that this may mean that where Investors have chosen to invest into a private limited company, rather than through gilts, equities and corporate bonds, greater scrutiny will be applied. We are aware of a number of refusals of visas where private company investment structures have been created to be used for Tier 1 Investor visas and we expect that these structures will be more closely scrutinised to ensure that they have not been created to circumvent the rules and, in particular, the exclusion on property investment.
In our response to the Migration Advisory Consultation in 2014, we suggested that investment should be permitted into pooled funds which would benefit the UK economy and sectors where investment was needed. The Government has now taken these suggestions on board and will create “a new provision for pooled investments, which are supported by Government, to back projects with a clear economic benefit to the UK, such as supporting small and medium enterprises”. This may be through new funds or through funds such as those operated by the British Business Bank. It appears that the changes will seek to move Tier 1 (Investors) away from investment portfolios and into more active funds where the investments are being used directly to create jobs and growth.
What should investors planning to come to the UK do now?
We recommend that investors who have made plans to come to the UK in 2019 do the following:
- Ensure that they are able to provide comprehensive information about their sources of wealth and the investment funds - this will include employment and business documents, evidence of the sale of shares or assets, dividend distributions, historic gifts and trust distributions. As the Government has indicated that the requirements for audits will cover “all” of the applicant's business and financial interests, the information and documents should cover the person’s source of wealth going as far back as possible.
- Review current investment, funds and assets and ensure that the funds to be used for the UK Investment (£2m, £5m or £10m) or the assets from which they are generated, can clearly be shown as owned by the prospective Tier 1 Investor for the past two years.
- If gifts are still to be accepted, ensure that any person gifting funds to an Investor is able and willing to provide a comprehensive audit of their source of wealth and the funds, and show that they have been in control of the funds for the past two years.
The Government will publish more detailed proposals on the UKVI website on 6 December.