EuropePolicy Updates

UK Tier 1 Changes: Bond Investments Now Ineligible as Home Office Moves to Increase Benefit to Economy


In a memorandum containing new immigration rules presented to Parliament, the Home Office outlines changes to the UK Tier 1 Investor and Entrepreneur Visa programs.

The changes aim to better protect against financial crime and ensure investments are of greater benefit to the UK economy.

Implications for the Tier 1 (investor) category

The changes supplement previous amendments from 2014 and 2015 to the Tier 1 investor category. The Home Office hopes to address doubts raised about the character and conduct of applicants using the route, and the sources of their funds.

Currently, applicants must provide evidence that they have held the funds they intend to invest in the UK for at least 90 days, or, if they have not held them for 90 days, provide evidence of the source of those funds. This 90-day requirement will be extended to a two-year requirement, to provide greater assurance of the provenance of applicants’ funds.

Applicants must currently open a UK bank account for the purpose of making their investment prior to making a Tier 1 (investor) application. This requirement is being tightened to make explicit that the bank must carry out all required due diligence checks and Know Your Customer enquiries, and confirm that these have been done.

Additional changes:

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(quotes from the Home Office’s memorandum)

  • Investment in UK government bonds is being excluded, to incentivise Tier 1 (Investor) migrants towards other forms of investment which have greater need to attract additional investment funds.

  • To increase transparency and demonstrate better where applicants are ultimately investing their funds, rules are being tightened around the use of intermediary vehicles. These include a requirement for any intermediary vehicles to be regulated by the Financial Conduct Authority (FCA), and a requirement to provide evidence of the final investment destination and how the funds are transferred there, regardless of how long any chain of intermediary vehicles is.

  • The definition of “active and trading” companies is being strengthened so that there must be stronger evidence that such companies are trading in the UK. At this point of time, no further clarification has been made on the nature of the ‘much stronger evidence’ which will need to be adduced.

  • A clarification is being made to confirm that “price of the investments” means the price the applicant paid for the investments, not the face value (which does not in itself demonstrate that an applicant has invested £2 million in the UK, as required by the rules).

  • New provision is being made to allow investment in pooled investments which also receive funding from a UK or devolved government department or one of its agencies, such as the British Business Bank or the Scottish Investment Bank. This is because such vehicles will have been assessed as being of benefit to the UK economy by the department or agency providing the funding. The exclusion of other types of pooled investment vehicles remains, as the Home Office cannot be satisfied that the applicant’s funds are being invested to the benefit of the UK economy.

The Home Office has gone to great lengths to emphasise that the nature of the changes is to ensure funds being invested in the UK through the Tier 1 Investor category are of benefit to the UK economy, a consideration that was never previously on the forefront of the Home Office’s agenda given that approximately 85-90% of Tier 1 Investor applicants invested their funds in the low yielding government bonds.

The nature of the changes provides clarity but also greys the lines what will and will not be considered to be a qualifying investment. 

Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur)categories 

The Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) categories are being replaced by the new Start-up and Innovator categories. These existing categories are being closed as the new categories are introduced. The main features of the new categories are as follows:

  • The Start-up category is an expanded version of the Tier 1 (Graduate Entrepreneur) category. It is for those starting a new business for the first time in the UK. Applicants will not need to be graduates and will not need to have secured any initial funding. Successful applicants will be granted 2 years’ leave (doubled from 1 year) and will be able to progress into the Innovator category to continue developing their businesses in the UK after that time.

  • The Innovator category is intended for more experienced businesspeople. As well as an endorsement, applicants will need £50,000 to invest in their business from any legitimate source (reduced from £200,000 for most applicants in the current Tier 1 (Entrepreneur) category). The funding requirement will be waived for those switching from the Start-up category who have made significant achievements against their business plans. The category may lead to settlement in the UK.

This article was contributed by Arthur Sarkisian of Astons, a global immigration advisory.

Image via: © User:Colin / Wikimedia Commons

Christian Henrik Nesheim AdministratorKeymaster

Christian Henrik Nesheim is the founder and editor of Investment Migration Insider, the #1 magazine – online or offline – for residency and citizenship by investment. He is an internationally recognized expert, speaker, documentary producer, and writer on the subject of investment migration, whose work is cited in the Economist, Bloomberg, Fortune, Forbes, Newsweek, and Business Insider. Norwegian by birth, Christian has spent the last 16 years in the United States, China, Spain, and Portugal.

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