The government has announced a number of changes to the Tier 1 immigration category which are designed to encourage high net worth individuals, from outside of the European Economic Area, to invest and reside in the UK. The changes, if adopted, will enable investors and their families to apply for settlement at an earlier stage and make Tier 1 one of the most flexible immigration categories the UK has to offer. These changes, currently laid before parliament, are likely to take effect from 6 April 2011.

The current rules

Currently, in order to come to the UK for three years as a Tier 1 , HNW individuals must have available to them in the UK at least  £1 million and are required to invest at least £750,000 in UK government bonds or in active trading companies . Thereafter, individuals may be able to extend their immigration permission by a further two years, following which they may be eligible to apply for settlement , provided they have not spent more than three months per year outside of the UK.

The proposed new rules

The changes announced include the following:

• Individuals who invest £10 million in the UK will qualify for settlement within two years of coming to the UK;
• Individuals who invest at least £5 million in the UK will qualify for settlement within three years;
• Individuals who invest at least £1 million cash funds in the UK will continue to qualify for settlement after having lived in the UK for five years; and
• Tier 1 will be able to spend up to 180 days out of the UK, whilst retaining eligibility to settle in the UK.

The UK vs other destinations of choice for HNW individuals

It is anticipated that the measures will enable the UK to compete with other countries, such as Canada and Switzerland, which already have immigration categories that confer significant advantages upon HNW individuals willing to invest.

In particular, investors coming to the UK do not need to demonstrate that they have two years of prior business management experience as is required by Canadian immigration law. In addition, investors will also be able to choose whether to invest in UK government bonds or in active trading companies, whereas under the Canadian Investment Program, individuals must lend directly to the Canadian government at zero percent interest and there are very specific rules governing the types of qualifying investments that can be made in Switzerland.

The amended Tier 1 permission will retain the range of existing types of qualifying investments, whille introducing more flexibility to reflect the requirements of some HNW individuals to travel for up to 180 days per year, without jeopardising eligibility to settle in the UK. The shortened qualifying periods for settlement for HNW individuals investing over £1 million will make the UK a more attractive destination of choice.

How we can help wealth managers

Wealth managers may have clients who are seeking to emigrate to a new destination , to invest their funds and to bring their dependants. Such clients are often keen also to secure UK nationality for their children and again, these new rules achieve this within a shorter timeframe.

Tracy Evlogidis is a partner and head of Immigration at Speechly Bircham. She can be contacted on +44 20 7427 6556 or by email: tracy.evlogidis@speechlys.com