The UK's Tier 1 visa programme, aimed at wealthy investors, has come under fire.
The UK’s Tier 1 investor visa programme has come under assault in the country’s upper legislative chamber, with some legislators saying the system confers far greater benefit on recipients of such visas than on their chosen destination.
While the market for what are called “golden visas” has been expanding in recent years to include the likes of Spain, Malta and Portugal, the UK’s own programme - requiring applicants to invest at least £2 million - is seen as one of the more robust. A number of private client law firms and wealth managers work with applicants for such visas, complementing the work done with resident non-domiciled persons, for example. (To view an article about the market for such visas around the world, see here.)
Besides its investment visa programme, the UK also has a similar programme targeted at entrepreneurs, with applicants required to create a certain number of jobs.
Not all legislators are happy about the situation, however. Late last month, two Liberal Democrat peers in the House of Lords, Baroness Hamwee and Lord Paddick, tabled an amendment to the 2015 Immigration Bill in which they proposed to scrap the Tier 1 (Investor) Visa, saying it yields meagre benefits for the UK.
“The government will have to come up with a strong argument for keeping this arrangement,” Lord Wallace of Saltaire, the Liberal Democrats’ main spokesperson for foreign affairs in the House of Lords, told WealthBriefing. He pointed to wording of a report in 2014 of the Migration Advisory Committee, a government-sponsored group monitoring such programmes, in which it said the balance of benefit from the programme was more to the applicants of visas than to the UK.
In its 2014 report, the MAC called for the £2 million lower limit to be set (the minimum had been unchanged at £1 million since 1994) and it stated there is “healthy scepticism concerning the benefits normally asserted”. The new minimum of £2 million was established in 2014.
In the year ending in the third quarter 2013 – the latest date covered in the MAC repot – it said 560 applicants (main applicants, not including dependents) succeeded in winning Tier 1 visas, up from 440 a year earlier, 301 in 2011, and 187 in 2010. Data also showed that Russian and Chinese persons were the two most common applicants, with those from the US in third place. The report also showed that most applicants invested their money in UK government debt (aka, gilts).
“We considered whether investment in UK gilts provides significant economic benefits for the UK. We are not convinced that it does. Investment in gilts by Tier 1 investors is simply a loan to the government. It is not a gift and the investor will likely sell the gilt once they obtain settlement,” the MAC said.
In a recent article on the controversy, Nicolas Rollason, partner and practice area leader at Kingsley Napley, said it was not entirely clear what has caused the latest criticisms of the visa programme by the LibDem legislators.
“2015 saw a tiny number of investors applying to come to the UK down from around 1,172 in 2014, to around 200 last year. In addition, historical concerns about how the route could be used by those whose wealth was dubious have largely been addressed by a 2015 immigration rule change, which now requires extensive due diligence to be undertaken on the source and origin of funds by UK banks (as having a UK investment account is a precondition). This source of funds and wealth information is now often being requested as part of the visa application, both in relation to the Investor themselves and any third parties who have made the funds available,” he wrote.
“What is clear is that the popularity if the Tier 1 Investor route has been badly affected by the increase in the minimum investment from £1 million to £2 million in November 2014 and geopolitical and economic factors affecting the two main source countries for these visas, China and Russia,” he continued.
“There are clearly now enough safeguards in place to ensure the integrity of the Tier 1 (Investor) route. Contrary to popular belief, the investor route is not a 'passports for sale' visa - it requires an extended period of residence with significant presence before someone can obtain permanent residence in the UK and only a year later would they become eligible for British citizenship, subject to security and character checks,” Rollason added.
Citizenship-by-investment programmes have been suspended in the past. Examples include those of Canada and Hong Kong, either because of issues such as backlogs of applications, or a desire to reform the programmes in a substantial way.