Tier 1 investor visa: breakdown of changes

On 16 October the Home Office confirmed the anticipated changes to the Tier 1 (Investor) Visa category, which will come into force on 6 November 2014. The new rules will not apply to existing visa holders and any applications submitted on or before 5 November 2014 will be considered under the old rules.

The changes were recommended in a report by the Migration Advisory Committee (MAC) who had been asked by parliament, to consider whether "the investment thresholds were appropriate to deliver significant economic benefits for the UK".

The principal recommendations made by the MAC which have been put into effect by parliament are as follows:

• The minimum investment threshold will be raised from £1m to £2m.

• The full £2m must still be invested in the UK by way of government bonds, share capital or loan capital in active and trading registered UK companies. The MAC made recommendations in its report on how to widen the investment options to bring more targeted economic benefit to the UK. However, the government will have a formal consultation on this point in due course.

• Investors may no longer use cash on deposit or the value of their residential property as part of their investment. Under the current rules, a maximum of £250,000 of the investment funds (25%) can be invested in any asset, including residential property, with the remaining £750,000 having to be held in qualifying investments.

• The rule requiring investments to be 'topped up' has also been removed. Investors are no longer required to 'top-up' investments if the market value of the portfolio falls below £2m, provided that the purchase price of the portfolio was £2m. If investors sell part of their portfolio they will need to purchase new investments within the same reporting period to ensure a portfolio purchase price of £2 million. Investors, under the rules in place before 6 November 2014, must still 'top-up' any shortfall in investments.

• New applicants will no longer be able to source investment funds through a loan. Under the current rules, it is possible for investors to borrow the funds required for the investments from a UK regulated financial institution, using offshore assets with a net value of £2m as collateral.

• There have been no changes to the residence requirements and main applicants cannot be absent for more than 180 days in each 12 month period.

• The £5m and £10m route still exists for investors wishing to benefit from accelerated settlement.

• Entry Clearance Officers and UK Visas & Immigration case workers are also being empowered to refuse a Tier 1 (Investor) application, if they have reasonable grounds to believe that:

  • the applicant is not in control of the investment funds;

  • the funds were obtained unlawfully (or by means which would be unlawful if they happened in the UK); or

  • the character, conduct or associations of a party providing the funds mean that approving the application is not conducive to the public good.

The changes made do not seem to include the controversial plans to auction investor visas to the highest bidder. The idea would have set a reserve price of £2.5m and any surplus raised over this would have been channelled as a gift to charitable causes.

The increase of the minimum threshold to £2m is the first increase in the minimum investment level in 20 years. The removal of the requirement to 'top up' investments will no doubt be welcomed as it has often led most investors to opt for a portfolio of UK government bonds, instead of taking more of an investment risk.

People wishing to apply under the current £1m investment regime will need to finalise and submit their applications as soon as possible in order to meet the deadline of 6 November 2014. We expect that there could be a high demand for appointments in the forthcoming weeks because of the number of applicants wishing to be considered under the current rules.

Dominic Potier de la Morandière is an associate at Wedlake Bell