The author of this article examines latest changes to the UK's investor visa regime.

Jurisdictions around the world compete for high net worth investors, with countries such as the UK, Spain and Portugal offering incentives for such persons in the form of accelerated residency and citizenship in exchange for a specified investment size. In the UK’s case, it recently announced changes to the investor visa regime. Here, Tijen Ahmet, an immigration solicitor at SA Law, with offices in London and St Albans, gives an opinion about the changes and what the main features are. This remains a controversial subject and this publication is keen to hear from other specialists about this issue.

The Home Office has this month published fundamental changes to the Tier 1 Investor Visa route coming into effect on 6 November. These changes follow the MAC’s (Migration Advisory Committee) recommendations published in their report earlier this year that appear to be in response to the ongoing concerns that investment from overseas is not sufficiently advancing the UK economy.

The current position
The investor visa route enables high net worth individuals and their families to make a substantial investment to the UK in return for residency with their family members who are able to work or study,  leading to eventual settlement within two to five years.

Since 1994 the minimum investment threshold has been £1 million with the current requirement of at least £750,000 ($1.21 million) to be invested in UK government bonds, stocks and shares or corporate bonds, and the remaining £250.000 to be invested in permissible UK assets.  At present should the investment drop below the £1 million threshold there must be a “top-up” to the investment funds by the next reporting financial period.

Key changes
The key changes that will take effect on 6 November 2014 for all applications made on or after this date are as follows:

-- The current £1 million minimum investment threshold is being raised to £2 million;
-- The entire investment sum of £2million is to be invested rather than 75% of funds;
-- in the event the investment market value falls, the “top-up” requirement is being removed; instead the investor will only need to purchase new qualifying investments in order to maintain the investment threshold;
-- The provision under which the required investment funds can be sourced as a loan is being removed;
-- The introduction of the power to refuse applications if there is reasonable grounds to believe that the investor is not in control of the investment funds, that the funds were obtained unlawfully or that the character, conduct or associations of a party providing the funds mean that approving the application is not conducive to the public good.

Impact of changes
The investment threshold has not been changed for the past 20 years despite numerous changes to other categories of the points based system in line with inflation. It is therefore not expected that this increase will deter high net worth individuals to whom this visa category will remain the most attractive option to relocate to the UK. The UK continues to attract investors from China, the Middle East, Russia and USA due to our strong financial sector, housing market and private education system.

Although the increase of £1 million is a substantial one, it will allow higher cash returns generating purchasing power for the investor. It is anticipated that the requirement to invest the entire £2 million will not have an material impact on investors given that they tend to invest the full amount required into their qualifying investment portfolio to make the process more straightforward.

As a practitioner I have seen the “topping up” requirement encouraging more investment in lower risk government bonds which provide little benefit to the UK economy. By removing this requirement there is no longer a need for quarterly valuations and most significantly, investors will be incentivised to make more investment risk to maximise their returns, providing a greater value to the UK.

Permitting the investment to be sourced by way of loan from a UK registered financial institution is not a method that investors tend to use for sourcing funds due to the reluctance on part of the UK financial institution to lend for this purpose. It is simply a transfer of funds, rather than an investment of new funds and therefore does not add any significant value to the UK economy. The removal of this provision will therefore have a minor impact on the investor’s ability to capitalise.

The impact of UK visa caseworkers being given new powers to assess the source of the investor's funds is a reappearance of the existing requirement and is more subjective in nature; the impact being that investors may need to disclose more documentation to evidence the source of their funds and future plans, to ensure that the decision maker is satisfied that investment funds are genuine and legitimate.

Future consultation
The government has indicated through a written ministerial statement that it will consult further on the types of investment that the Tier 1 route should encourage to ensure there are “significant economic benefits to the UK” through investment that is likely to be announced next year. The MAC report refers to widening the qualifying investments to charitable causes, venture capital schemes and infrastructure projects that are likely to increase the benefit to the UK, and reduce the current reliance on gilts.

The investor visa is very much about promoting the UK as “open for business” and is particularly attractive amongst Chinese and Russians, by offering a diverse and flexible labour market with a good quality of life, cosmopolitan society and popular lifestyle opportunities.

On the surface these changes may appear undesirable however it is in fact the beginning of positive “improvements” towards giving investors more opportunity to truly invest, whilst boosting the economy and remaining competitive in the worldwide market to attract high net worth individuals to the UK.