The much-anticipated report by the Migration Advisory Committee (MAC) – an independent, non-statutory and non-departmental public body that advises the government on migration issues – was published on 25 February 2014. The contents of which were based on “call for evidence” issued by the MAC to corporate partners and a number of current Tier 1 (Investor) visa holders.
Not fit for purpose
The “call for evidence” sought to answer the issue of whether or not the investment thresholds are appropriate to deliver significant economic benefits for the UK. Based on the evidence submitted to the committee, most of the Tier 1 (Investor) holders opted to invest in low-risk investment vehicles such as the UK Government Gilts as this was considered “Less risky but has greater certainty”.
It was found out that in practical terms, the capital raised through the Tier 1 (Investor) route “would barely fund two days’ worth of the national deficit and that the low proportion of investment is not sufficient to affect the interest rates on Government borrowing.”
Although the economic benefits of the visa were not as significant as originally envisaged, it was found out that investor migrants contributed to sectors such as the independent education sector, where investor migrants with children spends an average of 25,000 per year for each child, professional services sector and property/housing sector.
Although below are purely recommendations, it is very likely that the Government will implement most, if not all of the said proposals.
- Allowing investment in private companies and relaxing reporting requirements in line with Her Majesty’s Treasury Business Investment Relief.
- Widening of existing investment tools to include Venture Capital Schemes such as Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Venture Capital Trusts (VCT) and Angel Investments (where an investor invests into one or a number of small businesses that are generally at the start-up or early stages).
- Including new bespoke investments tools such as infrastructure bonds and property development where funds will be directed towards local authorities or private developers.
- Allowing philanthropic contributions or donations to education, arts & health care.
- Relaxing the top up requirements to incentivise investment in other instruments other than UK Government Gilts. This is to give the opportunity to those investors who are looking at high risk investments.
- Increasing the investment threshold to 2 million GBP.
- Removing the option to invest by way of loan from a registered UK financial institution.
- Implementing a “Premium Route” in which investors under this category will benefit from accelerated settlement for the main applicant in just 2 years, and a residential requirement of just 90 days in addition to other requirements on accommodation, work and family.
- Setting a reserve price for the “Premium Route” at approximately 2.5 million and determined by way of auction. This amount would comprise of an investment of 2 million by the applicant and approximately 500,000 donated to the UK Government through good causes fund rather than general revenue for the Exchequer.
- Aligning settlement qualification periods for main applicants and dependants under the “Premium Route” so that all will acquire settlement at the same time.
It is still unclear whether the above recommendations by the Committee will be implemented by the UK Government. What is certain is that the said proposal is a good indication that the UK Government is not just aiming to have this reform in place because of policy effectiveness, but also because of the country’s competitiveness on the citizenship by investment sector abroad.
Please note that the planned changes in principle will take into effect sometime in April with an immediate implementation in practice forestalled. Whether the Government is looking at applying any transitional arrangements remains to be seen.
Westkin Associates may be able to provide you or your client advice in anticipation of this change. Whether they are already holders of the visa or looking at making an application prior to the rules change, our Tier 1 (Investor) team led by Amir Zaidi will be able to assist you in a smooth and effective manner.
For more information, please see our recent Investor Visa Seminar that was held at London Mayfair Hotel: https://www.youtube.com/watch?v=FCK22HIg0K4
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