Rose Carey, partner and head of immigration at law firm Speechly Bircham, explains the latest developments concerning the UK's Tier 1 (Investor) visa facility.

Rose Carey, partner and head of immigration at law firm Speechly Bircham, explains the latest developments concerning the UK's Tier 1 (Investor) visa facility.

Following the recent changes to the Tier 1 (Investor) visa, both wealth managers and banks have expressed concerns at a lack of clarity in the legislative alterations. Wealth managers and investors, however, have suggested ways in which the system could be altered to improve conditions for all sides, and stressed how important it is for all those involved to improve dialogue ahead of a proposed Home Office consultation. 

This article aims to define the recent changes to the Investor visa; describe the industry proposals for further alterations; clarify the Home Office’s intentions for the visa and consultation process; and finally give recommendations for wealth managers when dealing with the Tier 1 requirements.

Recent changes

On 13 December 2013, the Home Office introduced two new requirements: the first that loans could no longer be secured against investments used for the Tier 1 (Investor) visa; and the second that custody of the investments must be in the UK.

The Home Office explained that the purpose of allowing investors to qualify for these visas was to increase investment into UK Plc. There were concerns that people with perhaps £200,000 in assets were able to borrow money in this country using the purchased gilts (or other assets) as collateral and qualify for a visa with no discernible benefit to the country. The Home Office would prefer it if any loans taken out were secured against assets in the source country and the funds thus brought into the UK.

Potential for further change

Wealth managers would like to see a wider range of investment choices, particularly in relation to collective investments.  Currently investments can only be made in gilts, share capital or loan capital in UK-registered and trading companies, but gilts are resulting in a loss for investors and investing in equities can be volatile. A shortfall in the minimum investment level must be made up and failure to do so will result in the investor not qualifying for a visa extension.

Wealth managers have also been keen to stress the benefits of allowing collective investments to be classed as qualifying investments for the purposes of obtaining an investor visa. Opening up the system to allow allocations to collective investments would aid investors who are trying to secure diversification and, it is felt, increase the amounts that are invested. Part of the motivation is that the choice of investments currently offered is stifling investment, as it is hard to secure the level of diversification that investors want.

Another concern voiced by wealth managers has been in relation to the time within which the investments have to be made. Investors must make the investment within 90 days of entering the UK on their Tier 1 (Investor) visa.  Failure to make the investment in time could result in their visa being curtailed and the extension application being refused.

Conforming to the 90-day rule is more difficult than thought. Due to a variety of regulations wealth managers are not able to offer investment advice to investors when they are still in their home country. This means that they first need to meet them in the UK, and then go through exhaustive client checks so that they know the investors with whom they are dealing and the source of their funds. Without this due diligence, banks can become subject to reputational, operational and legal risks, e.g. money laundering. This is especially exasperating as the vast majority of applications for such visas originate in money laundering hotspots like Russia and China. It is only after such checks that wealth managers can offer advice and seek out qualifying investments.

Consultation

The Home Office has confirmed that there will be a consultation in the summer on the Tier 1 (Investor) category with a view to making changes. The Home Office will consult with interested parties including lawyers and wealth managers, providing an invaluable opportunity for wealth managers to put forward their suggestions for change.

Regarding specific areas of interest, the Home Office has indicated that it would be looking at the types and levels of investment but has not confirmed rumours that the minimum level of investment may be increased from £1 million ($1.5 million) to £2 million. The Home Office is also interested in hearing more about collective investments and how these work, and have confirmed that it is also looking at ways to improve its service. This might involve a dedicated helpline or a premium service for investors, suggestions certainly welcomed by many parties with definite scope for improved communication in this area.

Top 5 tips for wealth managers

·        Make sure investments are made within 90 days of the investor entering the UK – and check the entry date stamp on the visa

·        Monitor performance of investments and top up if there is a shortfall

·        Remember at the extension stage you will need to provide a portfolio report covering the last three years, detailing the performance of the investments

·        If investing in UK-listed companies, make sure they are registered in the UK as well

·        Finally, respond to the Home Office consultation.