Tier 1 (Investor) route
20 March 2014
The United Kingdom’s migration route for investors has now been in existence for almost twenty years. As you might expect, the number of Tier 1 (Investor) visas issued has been rising since the introduction of this route. Yet only a meagre 560* Tier 1 (Investor) out-of-country applications were approved in the year ending 2013 Q3. *(excludes dependants)
At a time when other countries are modifying their investor visa schemes to align with their immigration strategy, the UK’s version of the scheme has remained largely dormant. A prime example of this is the fact that the standard £1 million investment threshold has not been altered since 1994.
The government therefore recently commissioned the Migration Advisory Committee (MAC), an independent public body, to consider the level of economic benefits the Tier 1 Investor category brought to the UK and to present potential improvements to the scheme.
Higher investment threshold
The MAC recommends that the current minimum £1 million threshold be increased to £2 million and the list of permissible investment instruments be relaxed so as to permit wider investment activity such as Venture Capital schemes or Angel Investments whereby start-up businesses would potentially benefit. Given the MAC is not convinced that the standard approach to investing in UK gilts actually provides significant economic benefits for the UK, the move to open up the options is a sensible one and would allow investors greater scope to determine where best to invest their £2 million.
No more Loans
Although it has been possible since 2004 for migrants to use investment funds sourced through a loan from a UK regulated financial institution provided that the applicant had sufficient personal assets, this provision has never been widely applied. Furthermore, it does not add any significant value to the UK economy as it is simply a means for the allocated funds to be transferred from a UK financial institution to the UK government via the investor.
‘Incentivised’ Premium Route
The new scheme would continue to offer accelerated settlement for the main applicant, with a qualification period of two years. In addition, the MAC recommends that the government relaxes residence requirements for those who make use of the premium route, such that the individual need only be resident in the UK for a period of 90 days in any consecutive 12 month period.
Visa by Auction
In setting a price for such an incentivised visa, the MAC puts forward the notion to auction a limited number of premium route visas (perhaps 100 each year) with a reserve price of £2.5 million. Any bid of £2.5 million would comprise an investment of £2 million by the applicant – as under the standard route – plus a gift of £500,000 donated to the UK government which would be earmarked for good causes. Successful applicants would still remain subject to strict due diligence checks by the government and financial institutions prior to the visa being awarded.
The MAC has proposed what appear to be logical improvements to an existing but outdated and underutilised migration route for investors. Whilst the proposed increase in the minimum threshold may serve to reduce demand from potential investors, the widening of the permissible investment instruments would be of greater benefit to the UK economy.
However, the MAC’s visa-by-auction suggestion is unlikely to gain approval from every quarter and, as such, may be seen as a step too far by the government. An implementation of such a radical proposal is, in our opinion, therefore unlikely to be executed ahead of the next election.
Perhaps the most we can hope for in the short term is a clear indication from the government as to where they wish to position the United Kingdom when it comes to welcoming high net worth migrants to the UK. Are we ‘open for business’ or would the government prefer foreign investors to invest their money elsewhere and thus maintain the focus on driving net migration down? Until this internal conundrum is resolved, we are unlikely to see any drastic changes being made to the make-up of the existing investor visa category.