The UK government has recently split up the UK Border Agency into two entities, namely the Immigration and Visa Directorate and the Immigration Law Enforcement Directorate, both of which will report directly to the Home Office.
The Tier 1 category of the points-based system1 was designed to allow highly talented migrants from outside Europe, and investors willing to invest a significant amount of capital, to enter the UK.
TIER 1 (EXCEPTIONAL TALENT)
This visa category enables current or potential world leaders in the fields of art and science to come and work in the UK.
Each applicant must be endorsed by one of the four designated competent bodies – the Royal Society, the Arts Council England, the British Academy or the Royal Academy of Engineering. Each of these bodies has an annual limit of either 200 or 300 endorsements to distribute in two yearly allocations running from April to September, and from October to March. A total of 1,000 endorsements are available each year from April to March, but, as the requirements are so stringent, this cap is unlikely to ever be reached.
The application process is conducted in two stages. Firstly, the applicant must obtain an endorsement from one of the designated bodies that they are ‘internationally recognised in their field as a world-leading talent’2, or that they have ‘demonstrated exceptional promise’ and are likely to ‘become a world-leading talent’. The application is judged against the relevant criteria set for either science or art.
Initial leave to enter or remain in the UK in this category is granted for three years, which can be extended for a further two years as long as the applicant can show that:
- the designated body has not withdrawn its endorsement;
- the applicant has earned money in the UK as a result of employment or self employment in the expert field as previously endorsed by the designated body;
- the English language requirement is satisfied.
Applicants who spent a continuous period of two years in the UK in this category will be eligible for permanent settlement if the above-mentioned requirements continue to be met.
TIER 1 (INVESTOR)
The Tier 1 (Investor) category attracts wealthy individuals to make an investment in the UK. Applicants for a Tier 1 (Investor) visa are exempt from the English language and maintenance requirements, and are permitted to be employed in the UK.
To make a successful application, the individual must prove sole possession of a minimum of:
- £1m cash available for investment in the UK; or
- £2m in personal assets, plus a loan of £1m cash to be available for investment in the UK.
The funds must be held in a regulated financial institution and must be freely transferable and disposable in the UK. It is important that the funds are available as cash, although foreign currency is accepted provided it amounts to the required level after conversion. It must not be invested through an offshore company or trust.
The initial visa is granted for three years. The successful applicant must invest at least 75% of the minimum required investment (£750,000) within three months from when leave to enter, or leave to remain, is granted. Investment can be made in UK government bonds or by purchasing share or loan capital in active and trading UK registered companies, other than those principally engaged in property investment.
The balance of the funds needs to be held as cash or invested in a residential property (as the unmortgaged part) in the UK.
An accelerated route to permanent settlement is available within two years where an applicant has invested £10m in the UK or within three years if £5m has been invested, and if the required level of investment has been maintained for the entire period. Therefore, to qualify for permanent settlement after three years, the applicant would have to invest £3.75m in the UK as government bonds, or other authorised investment, and maintain the balance of £1.25m in the UK as cash.
Applicants who do not qualify for the accelerated route to permanent settlement can apply for an extension of their visa after three years and for permanent settlement after five years. At each stage they will need to prove that they have made and maintained the required investment.
TIER 1 (ENTREPRENEUR)
This route is open for applicants who have personal access to £200,000 (or in some circumstances £50,000) and who wish to set up or take over a business where they will be actively involved in its day-to-day management. An applicant is only permitted to work for the business they invest in, and the company chosen for investment must not be principally engaged in property development or management.
In order to be successful, an applicant must demonstrate that they have personal access to:
- a minimum of £200,000 (of their own money or from third parties); or
- a minimum of £50,000 (with institutional funding) from one or more registered venture capitalist firms regulated by the Financial Services Authority, one or more UK entrepreneurial seed funding competitions listed as endorsed on the UK Trade and Investment Department (UKTI) website, or one or more UK government department, and made available by the department(s) for the specific purpose of establishing or expanding a UK business; and
- the money must be held in one or more regulated financial institutions and be disposable in the UK; or
- if the money was already invested in a business in the UK, it was not made more than 12 months before the date of the application.
The Home Office announced the following changes to this route on 30 January 2013:
- the introduction of a ‘genuine’ entrepreneur test as a form of assessment of an applicant’s credibility, including previous educational and business experience (or lack thereof), the source of the money, any business plan and market research on the chosen business;
- further specified criteria may be sought when assessing initial applications, including the request of additional documents or an interview with the applicant should any concerns arise;
- specific requirements for the investment of funds to be continuous throughout the period of leave granted rather than solely at the time of application; and
- a new power for the Home Office to curtail the leave if a Tier 1 entrepreneur is found to be non-compliant.
In addition to meeting the strict financial requirements, the applicant must also satisfy the English language and maintenance requirements. The real hard work starts after the applicant has obtained leave as a Tier 1 entrepreneur – apart from making the required investment in a new or existing British business, within six months from the date when they arrived in the UK under Tier 1 entrepreneur, they must:
- register with HM Revenue & Customs as self employed; or
- register a new business in which the applicant is a director; or
- register as a director of an existing business.
Within 24 months the applicant must prove that their investment, in either a new business or in a business joined as a director or taken over, has created the equivalent of at least two new full-time jobs for people settled in the UK for a minimum of 12 months during the preceding two years.
Evidence that all of the above requirements have been met will be required both at the extension and settlement stage.
The accelerated route to permanent settlement is available after three years continuous residence in the UK if the applicant:
- created at least ten new full time jobs; or
- established a new UK business that has had an income from business activity of at least £5m during a three-year period; or
- has taken over or invested in an existing UK business resulting in a net increase in income from business activity of £5m during the three-year period (when compared to the immediately preceding three-year period).
TIER 1 (GRADUATE ENTREPRENEUR)
This scheme has replaced the Tier 1 (Post-study work) category and allows non-European graduates to establish a business in the UK. It is also available to overseas graduates who have been identified by UKTI as elite global graduate entrepreneurs who intend on establishing a business in the UK.
The Home Office has produced a list of authorised bodies that are permitted to endorse recent graduates wishing to apply under this route who do not have access to £200,000 but instead have an ‘outstanding business idea’ that they wish to develop in the UK.
Higher education institutions will play a major role in identifying graduates who have developed ‘world class innovative ideas or entrepreneurial skills’ as well as in endorsing and providing support to those graduates.
There is a limit on the number of people who can apply in this category to 2,000 from 6 April 2013 to 5 April 2014 and will be allocated on the following basis:
- Qualifying higher education institutions will be given a maximum of ten places each for graduates in any subject, known as general endorsements and 900 places in total;
- Qualifying higher education institutions will be allocated 1,000 places for MBA graduates, known as MBA endorsements; and
- UKTI will be allocated 100 places for overseas graduates, known as global endorsements;
- apart from producing the letter of endorsement from a University or UKTI, applicants must also submit evidence that they meet the English language and maintenance requirements;
- successful applicants will be granted leave for one year and may apply for an extension of a further year. This route will not lead to settlement on its own.
TIER 1 (GENERAL)
This category was designed to allow foreign professionals to live and work in the UK in exchange for contributing to the UK economy. The entire process is based on the points scored by the applicant in the application. This scheme has been closed to new applicants since 6 April 2011.
Holders of valid leave granted under the highly skilled migrant and Tier 1 (General) schemes may still apply for extensions or settlement as long as they continue to meet the requirements set for income, education, experience, English language and maintenance.
In April 2011, David Cameron said: ‘Tier 1 (General) visas were supposed to be reserved for only the highest skilled migrants but that evidence have shown almost a third of migrants in the UK under this scheme were not employed in highly skilled jobs’. We agree that some Highly Skilled Migrant Programme applicants might have abused the system in the past, but the stringent requirements for Tier 1 (General) extension applications make it impossible for applicants to remain in the UK if they do not meet the earnings criteria and maintenance.
In January 2013, the announcement that absences of 180 days pa (rather than collectively for the entire five-year period) for all the above categories will be allowed for settlement applications made the UK a more attractive destination to wealthy migrants who travel frequently abroad for business.
The Tier 1 (Exceptional talent) route has been open since 2011, but a disappointingly low number of applications have been made, mainly due to the fact that the entry criteria for selecting the world leaders are so high.
It remains to be seen whether introducing a subjective test will lead to inconsistent decisions and giving discretion to the case workers. It will defeat the main purpose of the points-based system, ie to create a transparent and objective immigration system, taking away the discretion from case workers.
Critics have complained that the government’s closure of the Tier 1 (General) and Tier 1 (Post-study work) categories is damaging to the UK’s economy. It would have been more beneficial to the ‘public purse’ to keep these schemes open for high earners, and introduce more stringent requirements, to ensure taxes are paid to HM Revenue & Customs, especially n the case of self-employed earnings.
The government has stressed that the UK remains open to the brightest and best genuine migrants with ideas and motivation to drive economic growth. We anticipate that more changes will follow to make the UK more attractive for foreign investment.
By Alfreda Joubert, managing associate, and Anita Ofis, trainee solicitor, Magrath LLP.
E-mail: Alfreda.firstname.lastname@example.org; email@example.com.
- The points-based immigration system is the means of regulating immigration to the United Kingdom from outside the European Economic Area (EEA).