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The Migration Advisory Committee (MAC), a non-departmental public body, was asked by the Government to consult with investors and interested parties on the UK's Tier 1 (Investor) programme and what changes could be made to increase the economic benefit to the UK.
As a result of the consultation MAC has recommended a number of changes to the programme. The Government is now considering whether to implement those changes.
The MAC report made the following recommendations:
Prior to the Tier 1 (Investor) programme, the UK's previous investor programme required a minimum investment of £1 million and this has remained the requirement since 1994. It seems inevitable that this would be subject to an increase.
It is unlikely that this will put off investors considering using the programme. However, if the types of permitted investment are not widened then it could be a deterrent.
Currently investors can invest into UK Government bonds (gilts), share or loan capital to UK registered and trading companies. In theory it is possible to invest in a private company but difficulties arise at the extension stage as the investor requires a portfolio report on the value and performance of the investments, which would prove difficult for funds invested in a private company.
MAC has recommended widening the permitted investments to create greater benefit to the UK. Their suggestions include collective investments, property development, infrastructure bonds, philanthropic contributions and donations, venture capital schemes, angel investments and UK Government-operated funds for business.
At the moment the investment must be maintained throughout the period of residency on the investor visa and shortfalls in the value of investments require a top up before the next reporting period. This requirement and the requirement to produce a portfolio report makes it difficult for investors to show the value of their investment in a private company. The removal of the top up requirement would therefore make it easier for investors to invest in private companies.
This is the more controversial recommendation. The visas that are auctioned would lead to settlement in 2 years and citizenship after 5 years for the main applicant. The reserve would be set at £2.5 million GBP. The £2 million would be invested in the UK and the excess would be a payment to a Government fund. Effectively investors would be buying a 2 year visa that could lead to settlement.
There are two problems with this. The first is that only the main applicant can benefit from accelerated settlement. We already have an accelerated route to settlement under the current premium scheme where if the investor invests £5 million it will take 3 years and if they invest £10 million 2 years. This is not a payment but an investment and the investor could expect to see something of a return on such a large portfolio.
The reason the accelerated settlement route has not seen much take up is because only the main applicant can benefit and their partner and children must still wait 5 years. With the visas for auction MAC has not made a direct recommendation that dependants be allowed to settle at the same time as the main applicant. Therefore, this disincentive is still in place.
Secondly, British citizenship will still take 5 years even if the investor obtains settlement after 2 years. This is another reason the current accelerated settlement route is not seeing any take up.
One good point about the premium visas by auction is that investors could spend less time in the UK (90 days), which is potentially attractive for those with global business interests. The consequences of this for tax and estate planning would, however, need to be considered.
At the moment a UK FCA regulated bank can lend an investor £1 million based on the bank being satisfied the investor has net personal assets of £2 million. There are tax advantages for applicants who are already tax resident in the UK. The recommendation is that this source of funding be removed.
The visas by auction may not interest investors as their dependants cannot settle at the same time and it would still take 5 years to obtain citizenship. It is also difficult to see how much extra revenue this would generate for the UK as it is proposed to limit the "premium" visas to 100 per year.
It would be better to keep the current premium routes of £5 million and £10 million but allow dependants to settle at the same time as the main applicant, reduce the residence requirements to 90 days for the premium routes and allow flexibility around the permitted types of investment in the UK.
This would give investors a greater choice of investments depending on their risk appetite and would generate growth for businesses in the UK, many of which still struggle to get investment through traditional routes.
The MAC has pointed out that gilts do not generate revenue for the UK economy. In reality, gilts can also be a poor investment choice for those investors who would rather invest in something that has the possibility of greater return, even if there is greater risk involved.
This article was written by Rose Carey.
For more information please contact Rose on +44 (0)20 7427 6524 or firstname.lastname@example.org