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Investor Visa Update

TIER 1 (INVESTOR)

PERMITTED INVESTMENTS

It is a requirement of a Tier 1 (Investor) Visa that the individual brings at least £1,000,000 into the UK and that he or she invests not less than 75% (i.e. £750,000) of his or her capital in the UK within 13 weeks of entering the UK under the visa. The remaining 25% may be held on deposit in a UK bank account, or may be invested in UK assets.

Pursuant to the new rules on Investor Visas (in force from 6 April 2011) the individual may take advantage of the Tier 1 (Investor) Visa “accelerated route to Settlement”. The new rules provide that the individual may invest £1,000,000, £5,000,000 or £10,000,000 in the UK and thereby qualify for Indefinite Leave to Remain (Settlement) in five, three or two years respectively. The requirement to invest 75% of the capital in Permitted Investments within 13 weeks of entering the UK continues to apply.

1. PERMITTED INVESTMENTS

Investors are required to make their investment in the form of UK Government bonds, or share capital or loan capital in active and trading companies that are registered in the UK. The portfolio may contain a combination of debt and equity.

In order to satisfy the requirements for the grant of a Tier 1 (Investor) Visa the applicant must make a capital investment (either by way of government bonds or loan or share capital) in a business operating within the UK economy and subject to UK taxation. The UK Border Agency (UKBA) will consider a UK company to be one that meets all of the following requirements:

  • has its registered office or, if it has no registered office, its head office in the United Kingdom;
  • has a United Kingdom business bank account showing transactions for the business that are current; and
  • is subject to United Kingdom taxation.

Multinational companies that are registered as United Kingdom companies with either a registered office or head office in the United Kingdom are acceptable, and investment in share or loan capital in active and trading companies that are registered in the UK can include investments held in foreign currencies.

There is limited information from the UKBA on the types of investment which are acceptable, for example, whether a minimum investment grade is required, whether the company must be a FTSE100 company, listed on the London Stock Exchange or AIM, etc, and therefore it can be assumed that, provided the investment is in a UK company or in UK Government bonds, the investment is acceptable.

2. UNACCEPTABLE INVESTMENTS

Investments in overseas companies and emerging markets are not permitted.

The UKBA states that the following investments will not be counted towards the £750,000, £3,750,000 or £7,500,000 (as applicable), i.e. the 75% investment, required to satisfy the visa requirements:

  • The 75% must not be invested through an offshore company or trust. This is to ensure, among other things, maximum tax benefit to the UK. The UKBA does not regard investment from offshore companies as investment in the UK. (This requirement does not apply to applicants whose previous permission to stay was given under the former Investor category).  Please note that there is a potential risk that the restriction on investing through an offshore entity also restricts investments which have been ‘booked’ offshore i.e. purchased through an offshore entity. We understand this is common practice among UK banks when purchasing investments for a client’s UK portfolio. It is important to ensure that you raise this with your bank and specifically request that your investments are booked in the UK.
  • The 75% must not be invested in open-ended investment companies, investment trust companies or pooled investment vehicles. This is because such investments cannot be guaranteed to be in the UK.
  • The 75% must not be invested in companies mainly engaged in property investment, property management or property development. This requirement prevents investment in companies whose main function is to own or manage land or buildings. It does not prevent investment in, for example, construction firms, manufacturers or retailers who own their own premises.
  • The 75% must not be invested by using deposits with a bank, building society or other enterprise whose normal course of business includes the acceptance of deposits, including ISAs, premium bonds and saving certificates issued by the National Savings and Investment Agency (NS&I). This is because the intention of the Tier 1 (Investor) Visa category is to encourage long-term investment in the UK. NS&I Guaranteed Income Bond and the Guaranteed Growth Bond are acceptable because they mature after a minimum fixed period, but the other forms of saving with NS&I do not have this incentive for funds to be kept in them.
  • The UKBA will not approve applications that rely on leveraged investment as the UKBA does not treat the funds used as the applicant’s own funds.

3. LEVEL OF INVESTMENTS

Total Investment Amount in Permitted Investments (75%) Balance in
other investments (25%)
£1,000,000 £750,000 £250,000
£5,000,000 £3,750,000 £1,250,000
£10,000,000 £7,500,000 £2,500,000

The investor must ‘invest’ £1,000,000, £5,000,000 or £10,000,000 in the UK and must invest 75% of the total investment in Permitted Investments (as set out in the table above). The balance of funds comprises any further money necessary to bring the total funds invested by the applicant up to £1,000,000, £5,000,000 or £10,000,000. If the investor’s investments total £1,000,000, £5,000,000 or £10,000,000 (as applicable), no balance of funds is necessary.

It is important to note that the value of the Permitted Investments must be a minimum of £750,000, £3,750,000 or £7,500,000 (as applicable) at all times. If the value of any investments falls, further funds must be invested to bring the value of the Permitted Investments to the minimum level by the next reporting period. For example, if the investments are shown to have fallen in value in the quarterly report to the end of February one year, and the investments have a quarterly reporting period, the value has to have been made up by the quarterly report to the end of May that same year.

Major assets in the UK, such as unmortgaged property, may be taken into account for the balance of funds, provided that they do not make up more than 25% of the total investment sum required. The following can be taken fully into account subject to a limit of 25%:

  • the value of the unmortgaged portion of the applicant’s own home which has been provided by a surveyor who is a member of the Royal Institution of Chartered Surveyors;
  • assets in the UK held for investment purposes (but not personal possessions);
  • the value of all other investments in the UK; and
  • cash on deposit in the UK.

Any drawing on the account, for example, through the use of a credit or debit card by the investor, should be acceptable provided that the level of funds always remains above £750,000, £3,750,000 or £7,500,000 in Permitted Investments, and £1,000,000, £5,000,000 or £10,000,000 in total.

4. SUPPORTING DOCUMENTS FOR EXTENSIONS

When the investor applies to extend his/her visa, he/she must submit a portfolio report showing the investments held throughout the three year period. There are specific requirements for the portfolio report which it is helpful to note at the outset to ensure that the documentation is correct.

The portfolio report must be certified as correct by a financial institution regulated by the FSA and must:

  • cover the required period of the investor’s permission to stay in the Tier 1 (Investor) category. This period begins no later than 13 weeks after the date the investor entered the UK;
  • continue to the last reporting date of the most recent quarter of the year directly before the date of the application for an extension;
  • include the value of the investments;
  • show that any shortfall in investments was made up by the next reporting period;
  • show the dates that the investments were made;
  • show the location of the investments, which should be UK companies;
  • (for investments made as loan funds only) include audited accounts (or unaudited accounts with an accountant’s certificate) for investments made as loan funds to companies, which must give full details of the applicant’s investment;
  • show the name and contact details of the financial institution that has certified the portfolio as correct, and confirmation that this institution is regulated by the FSA (this will normally appear on the letterhead of all official documentation);
  • show that the investments were made in the investor’s name and/or that of his/her spouse and not in the name of an offshore company or trust even if this is wholly owned by the applicant;
  • include the date that the portfolio was certified by the financial institution: and
  • state that the institution will confirm the content of the letter to the UKBA at their request.

If you would like further information on these matters please contact Ceris Gardner or Eesha Arora.

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