Investment threshold for Tier 1 UK visa doubled

The Home Office has announced changes to the Tier 1 (investor) visa route which will require foreign nationals to invest £2m in the UK in order to be granted a visa, instead of the current £1m.

The full investment sum will now have to be invested in qualifying investments such as government bonds and shares in UK companies, rather than 75 per cent of the sum (loan option) under the current rules.

The changes have been made following recommendations published in a report by the Migration Advisory Committee (MAC) and will take effect on 6 November 2014.

Nadine Goldfoot, a partner at Fragomen, believes that the Home Office’s decision was probably inevitable. “The independent Migration Advisory Committee had recommended the increase and, by and large, the Home Office tend to accept their recommendations,” she said.

“The impact of a higher investment requirement is moot. If a migrant can afford to invest £1m for a visa they can generally afford £2m. The change may see a few investors turn their attention elsewhere, perhaps to the Maltese citizenship by investment programme, but the number probably wouldn’t be huge.

“The changes that will most affect the behaviours of investors is actually more obscure, almost hidden in the technicalities of the rules. As of 6 November an investor will not be able to rely on loaned funds and the value of their investment will be able to drop below £2m,” added Goldfoot.

Nick Rollason, immigration law partner at Kingsley Napley, commented: "The new requirement to invest the full £2m into the portfolio of specified investments is an unexpected change. Previously investors have only had to put 75 per cent of their investment into this portfolio and could keep the balance in assets in the UK. While in reality, many of our investor clients did put the full amount into their portfolios, many more used the 25 per cent towards the purchase of property in the UK.

"The increase of the minimum investment amount to £2m may deter 'budget' investors but it will have little effect on the high net-worth investors the UK and in particular London, continues to attract. Similarly, the removal of the 'loan option' is unlikely to make a huge impact as this was not popular with our clients and was difficult to do in practice. The main effect of the loan option being stopped may be felt by Chinese investors who have used the loan option due to current restrictions on taking capital out of the PRC [Peoples Republic of China]."

Goldfoot suggested that the number of Chinese Tier 1 Investors, in particular, could potentially take a “real hit” due to the prohibition on loaned funds. “Getting money out of China isn’t easy and most investors had to loan funds against their assets at home. Preventing the use of loaned money could prevent the entry and investment of the Chinese.

“Allowing the value of funds to fall below the investment threshold is much more helpful.  Until now an Investor’s stay could be jeopardised if the value of their investment fell and they did not invest more to top it up. This led to conservative investments, typically in low risk equity or gilts."   

The Home Office has also removed the requirement to 'top up' an investment if its value falls below the £1m threshold during the visa period. Golfoot added: “Removing the top up requirement increases the likelihood of investment in higher risk but potentially higher return investments. That can only be a good thing for the small companies and start-ups that have grown after the recession.”

Phillip Barth, head of European immigration at Withers welcomed the government's changes, but said it had missed an opportunity to attract further investment by diversifying the areas foreign nations can invest in.

He commented: "The government has taken on some of the MAC's changes but it appears that it wasn't prepared to take them all on-board. It's disappointing that no changes have been made to the current class of qualifying investments in order to comply with the rules.

"It's widely felt that these are too restrictive, and the MAC made a number of recommendations to broaden this class to bring more targeted economic benefits to the UK. The government has declined to grasp this issue and instead will initiate a formal consultation on this 'in due course', but probably not in time to implement before the 2015 election."