The UK recently overhauled its Tier 1 investor visa regime. Here is a guide to what has happened and how investors are affected.

Earlier this year, the UK government unveiled changes to immigration rules, including the system affecting high net worth individuals. When the administration temporarily shut down the Tier 1 Investor Visa regime last year, it took practitioners by surprise. That decision also coincided with European lawmakers blasting “golden visa” programmes in a number of countries for facilitating money laundering. (The industry hotly contests such claims.)

The following commentary comes from Ahmed Ajina, associate at the law firm Seddons. This publication is pleased to share these views and invites readers’ reactions. Email tom.burroughes@wealthbriefing.com

On 7 March 2019 the Home Office released its long-anticipated Statement of Changes to the Immigration Rules (HC1919). These changes came into effect on 29 March 2019. The Statement of Changes confirmed that the Tier 1 Investor route would remain open to investors who wish to secure residence in the UK on the basis of their investments. The Statement of Changes has also confirmed, however, that there will be a number of changes to the Tier 1 Investor Route. 

Changes to the Tier 1 Investor Route

-- Applicants will need to have held their investment funds of £2 million for a minimum period of two years prior to the date of the application. This was previously three months. Where the funds have not been held for a period of two years, the applicants will need to demonstrate the source of their funds. Consequently, additional documentation would need to be provided as an audit and paper-trail exercise in order to substantiate the source of these funds. 

-- Applicants will need to provide an affirmation from their UK bank to demonstrate that the bank has carried out its relevant due diligence checks on the applicant and the source of their funds (also known as ‘KYC’ checks). Previously, applicants were only required to show that they held a UK bank account. The Home Office will now be able to refuse a Tier 1 application where there are reasonable grounds to believe that funds have been obtained illegally or transferred to the United Kingdom unlawfully.  

-- Applicants will no longer be able to invest their funds in UK government bonds. The reason behind this change is that it has long been considered that such investments do not contribute any meaningful economic benefits to the UK. 

-- Applicants who wish to invest their funds in ‘active and trading UK companies’ will need to show that the company is genuinely trading and has a substantial presence in the United Kingdom. Such companies will need to be regularly trading goods and services, be employing at least two individuals (not directors of the company) and have a business bank account. 

-- Intermediary vehicles, such as private wealth management firms, will now need to be regulated by the FCA. This requirement has been introduced to increase transparency with regard to the investment of the applicants’ funds. 

Impact of changes to the Tier 1 investor route

Although it appears on face value that the Tier 1 Investor route has been tightened up in a number of ways, in practice these changes should have little or no impact on legitimate and genuine applicants who wish to secure residence in the UK on the basis of their investments.  

One example of this is the two-year requirement for holding investment funds. Where the funds have not been held for a period of two years, applicants could still apply for residence under this category, provided that they are able to verify the source of their funds. This should not be an obstacle for legitimate and genuine applicants. 

Additionally, the due diligence and KYC checks affirmation, which will now need to be provided by the UK bank, should not be an arduous task. Such checks would ordinarily be expected to have been carried out by the UK banks under the previous regime, as it was always a requirement for the applicant to hold a UK bank account. 

Therefore, in spite of the changes to the Tier 1 Investor Route, and the "additional requirements" which will now need to be met by the applicants, these changes should present little difficulty for legitimate and genuine applicants who wish to apply for the Investor Visa. 

The Home Office has long held concerns regarding the background of certain Tier 1 applicants and the source of their funds. These changes, however, ensure that the United Kingdom is better protected against financial crime and that the investments have a greater economic benefit to the UK, whilst at the same time retaining the straightforward nature of the Tier 1 Investor application process. 

How will existing Tier 1 Investor visa holders be affected?

Tier 1 Investor holders, who were granted their Tier 1 Investor Visas before 29 March 2019, will not be affected by these Statement of Changes. These applicants will still be able to reside in the UK under the old rules, they will be able to apply for extension applications until 5 April 2023, and apply can for settlement applications until 5 April 2025 under the old rules in place prior to 29 March 2019.