New Investment Routes Unveiled
On 7th March the Government has finally unveiled the changes to Immigration Rules that among some minor changes have also implemented the major upheaval of investment routes, which were announced in December last year.
In this piece, we propose a quick look at the biggest changes that are set to affect those who wish to make an application for leave to enter or remain in the UK on the basis of the investment they make into the UK economy.
Tier 1 – Investor
Last December, the Government made a shock announcement that they were suspending the Tier 1 (Investor) category until such time a review of the route would be finalised and new rules brought in place. The plan was almost immediately retracted at behest of immigration lawyers, who denounced the measure as unfair and unnecessary.
The Government has now laid down the changed rules for this category, which clearly indicate that the route has been changed from an economically passive one into one that is economically more active and is seeking to attract investments into UK based companies, rather than government bonds. It is further a reinforcement of a commitment to ensure the money entering into the UK economy via this route are not originated from dubious sources.
For all initial applications made after 29th March 2019, the only acceptable investment will be in a UK based, trading and active company. The UK Government bonds will not be an acceptable form of Investment. This approach closes the route to residency to High-Net-Worth individuals who are only seeking residency in the UK by way of investment and do not have more active economic goals in their mind. The Government bonds have long been a favourite with HNW individuals who did not mind committing to these low-yield, but also very low-risk investments to secure a UK residency. With this new approach the Government signals that whilst the UK still want the investment, it wants the investment to truly work for its economy. As such, the only acceptable investment for initial applications will be investment in a UK company.
Other changes pertain to the more detailed due diligence requirements when it comes to the source of funds. It will be no longer sufficient to show that the sums were held by the applicant for 90 days. This requirement has extended to a 2 year period. Thus, the applicants who wish to make use of this route, will now need to provide evidence in respect of funds covering 2 years.
An important note is that the money will need to be from sources that are not only considered legal in the UK, but also in the overseas jurisdiction where they originate from. The same applies to transfers. Therefore, any methods that have previously been used to circumvent limitations imposed by overseas jurisdictions on transferring money abroad, will likely be scrutinised and lead to refusal.
Apart from proving 2 year history on the funds, in cases where the funds come from another party, their character and conduct of these parties will also be looked at.
Considering all the above, it is now clear that the Investor route that was meant to be a route with very low economic risk, as well as nearly no limitation and as such often used by HNW individuals who otherwise would fail the scrutiny associated with other routes, has been changed considerably. The route in its new guise is effectively suitable for those who wish to enter or remain in the UK, but are willing to accept the higher risk associated with an investment in a trading company.
While it might seem that the new rules have the potential of lowering the interest in this route, it is to be considered in conjunction with other changes to immigration rules. Namely, the Tier 1 (Entrepreneur) route being closed to new applications and the fact that its replacement seems to suggest that an investment cannot be made in an existing business. In which case, for those looking to invest in a UK based business that already exists, the Investor route might be the only option.
Start-up and Innovator routes
In June 2019, the Government had announced that it was considering introducing a new route, Start-up route, that was to replace the Tier 1 (Graduate Entrepreneur) route. Later the same year, in December, announcement was meant that Tier 1 (Entrepreneur) route will also be closing down and replaced with a new route – Innovator.
The changes will see the Tier 1 (Entrepreneur) route closing to new initial applications from 29th March 2019 and the Graduate Entrepreneur one from 6th July 2019.
The Statement of Changes to Immigration Rules published on 7th March 2019, finally unveiled what these routes would look like in practice. Rules in relation to the new routes are found in Appendix W and seem to suggest the Government has taken a step back from Points based system. There are no points that are allocated under Appendix W, but rather requirements that are to be met cumulatively. The Statement indicates that the expectation is that all work-related routes will be transported under this Appendix, as the Immigration System changes. This indicating that Tier 2 visas are also likely to be transported from under Points Based system sometime in the future.
First, the routes are set to come into force on 29th March. Both routes allow for out of country applications, as well as in-country applications from qualifying routes, including the ones that are now being closed Tier 1(Graduate Entrepreneur) and Tier 1 (Entrepreneur). They have similar age requirements, namely 18 years and older and have higher English Language requirement, then their predecessors, the requirement being now set at B2 level. Maintenance for both routes is set at £945 held for 90 days.
Startup category will have an initial grant of leave of 2 years and this will also be maximum amount of time allowed under this category. Application for Innovator can be then made should the applicant meet the relevant requirements. Startup category will not lead to settlement.
In case of Innovator route, the initial leave will be granted for 3 years. The route can be extended without any limitation for further 3 year periods. The route can lead to settlement in as little as 3 years time, making this one of the quickest settlement routes. However, it has to be said that all 3 years must be under Innovator route and periods spent with other leaves will not count towards settlement under this route.
Both rules will be heavily reliant on endorsement from endorsement bodies that are specifically designated by the Home Office for such purpose.
The endorsement for the Startup application must come from one of the following:
- UK higher education institution which:
– is a UK recognised body or a body in receipt of public funding as a higher education institution, or
– has established processes for identifying, nurturing and developing entrepreneurs among its undergraduate and postgraduate population.
- An organisation which meets both of the following requirements:
– The organisation has a proven track record of supporting UK entrepreneurs, including resident workers, and
– The request to become an endorsing body is supported by a UK or devolved government department as being clearly linked to the department’s policy objectives.
There is a requirement that the organisation must be able to fully assess the proposed business against the criteria set out above and agree to stay in contact with the applicants and their business. There are specific checkpoints at months 6, 12 and 24 at which the organisation will assess the applicants against the Home Office requirements. It is therefore imperative that the applicants under this route make concerted effort to meet their business objectives as set out in the initial business plan.
The endorsement for Innovator can come only from an organisation that meet the requirements of (b) above.
Startup- specific requirements
To be successful under Startup category, the applicant must be able to demonstrate Innovation, Viability, Scalability.
Innovation means the applicant must produce a genuine, original business plan that meets new or existing market needs and/or creates a competitive advantage.
The second requirement refers to demonstrating that the applicant is actively developing, the necessary skills, knowledge, experience and market awareness to successfully run the business.
To meet the scalability requirement, the applicant will need to provide evidence of structured planning and of potential for job creation and growth into national markets.
Innovator- specific requirements
Endorsement criteria for this route differentiates whether the assessment if carried out for ‘same business’ or ‘new business’. Same business applies for the applications that are for leave to remain and the applicant is using a previous business. For instance a Tier 1 (Graduate Entrepreneur) or Startup migrant switching to Innovator route, using the business that they used for their previous application.
The Innovator route seeks to confirm the same criteria for the applications assessed under ‘new business’ criteria: Innovation, Viability, Scalability.
Innovation criteria is similar to that of startup route, namely the applicant has a genuine, original business plan that meets new or existing market needs and/or creates a competitive advantage.
Viability seeks to assure the applicant has the necessary skills, knowledge, experience and market awareness to successfully run the business. As we can see there is no learning curve allowed for innovator route, as is with startups. This is because the innovator route is for those who are already experienced businesspeople.
Scalability requirement expects to see the evidence of structured planning and of potential for job creation and growth into national and international markets.
There is an investment requirement with this category, which is set at £50,000. The funds can be the applicants own or from third party sources. Other sources can include investment from a UK based business, which is a welcomed addition. Specified evidence is required for such investment.
The business venture can be carried out by one or more team members, but each of them must meet the investment criteria on there own, therefore, if there are 2 members or more, each of them will need to invest at least £50,000. In case of team members who are UK residents, even if their residence is a temporary one under other Immigration categories, there will be no need to demonstrate investment for them.
If the applicant is relying on endorsement under the same business criteria, all of the following must be demonstrated:
- The applicant has shown significant achievements, judged against the business plan assessed in their previous endorsement.
- The applicant’s business is registered with Companies House and the applicant is listed as a director or member of that business.
- The business is active and trading.
- The business appears to be sustainable for at least the following 12 months, based on its assets and expected income, weighed against its current and planned expenses. (e) The applicant has demonstrated an active key role in the day-to-day management and development of the business.
(f)The endorsing body is reasonably satisfied that the applicant will spend their entire working time in the UK on continuing to develop business ventures.
To settle in the UK, the applicant will need to demonstrate ability to meet the ‘same business’ criteria set out above, apart from (f) and at least two of the following:
- At least £50,000 has been invested into the business and actively spent furthering the business plan assessed in the applicant’s previous endorsement.
- The number of the business’s customers has at least doubled within the most recent 3 years and is currently higher than the mean number of customers for other UK businesses offering comparable main products or services.
- The business has engaged in significant research and development activity and has applied for intellectual property protection in the UK.
- The business has generated a minimum annual gross revenue of £1 million in the last full year covered by its accounts.
- The business is generating a minimum annual gross revenue of £500,000 in the last full year covered by its accounts, with at least £100,000 from exporting overseas.
- The business has created the equivalent of at least 10 full-time jobs for resident workers.
- The business has created the equivalent of at least 5 full-time jobs for resident workers, which have an average salary of at least £25,000 a year (gross pay, excluding any expenses).
- If the applicant is relying on the criteria for creating jobs:
- The jobs must have existed for at least 12 months.
Team members will need to meet the criteria separately, meaning that they cannot rely on same job creation or investment etc.
From the criteria set out for settlement it is clear that this new route will be under a higher scrutiny in terms of delivering on the proposed business plan and being a true asset to the UK economy. It also indicates that business under this route is limited to incorporated business.
Despite the new routes being much more difficult to achieve, there are certainly positive developments in that the investment requirement is much lower than the Tier 1 (Entrepreneur) one, opening this route to young, dynamic entrepreneurs who do not have the funds, but are able to demonstrate strong business plan. It is also offering a quick route to settlement for qualifying applicants.
Contact us if you need assistance with your Tier 1 (Entrepreneur) application before the route closes on 29th March 2019. Or require assistance with the new startup and innovator routes.