Changes to Tier 1 (Investor) Rules

On 26 February the Home Office announced a Statement of Changes in the Immigration Rules, including to the Tier 1 (Investor) rules. The majority of the rules come into effect on 6 April 2015.

The main change is a new requirement for prospective Tier 1 (Investor) migrants to open a UK-regulated investment account before making an initial application. The Home Office wants to ensure that UK banks carry out due diligence checks on investors before they apply for entry clearance or leave to remain, not after.

Changes are also being made to the requirement for applicants to maintain their investments. The changes will mean applicants will no longer need to invest additional capital if they sell part of their investments at a loss, but they will be required to maintain all their capital within their investment portfolios. Buying and selling investments will continue to be permitted, providing the investor does not withdraw any capital. This change means that a Tier 1 Investor can maintain their investment by re-investing the gross proceeds from a sale and does not have to reinvest the original purchase price of that investment, and it is intended to remove an unintended incentive for investors to invest in UK government bonds rather than to invest in UK companies.

Clarification is being given to the rules regarding how investment funds may be spent, and the restriction on engaging in businesses principally concerned with property development or property management, due to increased queries on these subjects. Any investment or development of property to increase the value of the property with a view to earning a return either through rent or a future sale or both, or management of property for the purposes of renting it out or resale. The principle is that business income must be generated from the supply of goods and/or services and not derived from the increased value of property or any income generated through property, such as rent.

The new rules clarify that taxes, professional fees and transaction costs relating to the purchase and sale of investments cannot be paid from the investment funds except when the investment sum exceeds the initial investment capital, but the applicants are permitted to withdraw interest and dividends from the investments.

Further, the new rules state that any reinvestment must be made before the next reporting period or within 6 months of the date the sale was completed (whichever is sooner).

The minimum age of applicants in this category is being increased from 16 to 18. This change is being made to reflect the fact that it is not normally possible for 16- and 17-year old applicants to be wholly in control of their own funds and investments.

Kasia Janucik