Tier 1 Investor visas to cease on 1 January 2017?
By Daniel Cheung
Date: 1 March 2016
There is a current debate going on in Parliament as to whether to withdraw the Tier 1 Investor (“T1I) visa (£2m investment; previously £1m). In 2014, 1,172 applicants applied for the T1I visa. But following the investment criteria increasing from £1m to £2m, only 200 applications were made in 2015. About 60% of the applicants were from China and Russia. But in October 2015, a report by Transparency International suggested that the monies were “highly likely” to be laundered into the UK.
Proposed rule changes to the Tier 1 Investor visa
On 9 February 2016, Parliament considered the following new paragraph to be added into the Immigration Rules:
242S: After Clause 55, insert the following new Clause—
“Tier 1 (Investor) visa
(1) The Secretary of State must make rules which shall come into force no later than 1 January 2017—
(a) to close the Tier 1 (Investor) route;
(b) to close applications to extend leave under Tier 1 (Investor) to applicants in the United Kingdom before 1 January 2017.
(2) Nothing in this section shall affect leave to enter or remain of the holder of a Tier 1 (Investor) visa granted before that date in accordance with that leave.”
I have highlighted the above sentence that causes confusion – from 1 January 2017, would these rules cancel those already in the UK under T1I; or can those already in the UK extend their leave and apply for Indefinite Leave to Remain (ILR)? If we look at the history of Immigration Rules, changes to existing categories have been kind to those who hold leave in that category. For example, with Tier 1 General being abolished in 2011, the existing visa holders could still apply for extension and ILR.
Reading Hansard (the Parliamentary debate script) in its context, it was critical of the T1I. I deal with some of the criticisms raised and then explain why it is one thing to close the T1I route, and another thing to cancel existing T1I visas this year.
Criticisms raised and counter-arguments
- T1I “presents a major money laundering risk for the proceeds of corruption entering the UK.”
Banks are subject to anti-money laundering regulations and are governed by the Prudential Regulation Authority, a body of the Bank of England. If the applicant does not have a criminal conviction (which applicants are required to now prove) and the banks do not consider the monies as suspicious, then it is submitted the interests of justice would allow a presumption the monies have not been laundered.
- “Other recommendations, including that each applicant should be required to donate £500,000 to a UK good causes fund to demonstrate their contribution to British society, seem to have been ignored.”
In 2014, there were recommendations from the MAC (Migration Advisory Committee) about more productive means the investment monies could be invested in rather than bonds. However, we bear in mind the Home Office is a governmental body and is not authorised by the Financial Conduct Authority (FCA), which is the other body of the Bank of England. It is likely the Home Office therefore had difficulties in being able to determine what is and what is not a good investment.
- “I would have been much happier if the figures I had discovered on tier 1 had shown that the exceptional talent category had 2,000 to 3,000 people in it, the entrepreneur category 3,000 to 4,000 people and the investor category, 50.”
The Tier 1 Entrepreneur category has of course not been without its own criticism which has resulted in many applications being refused as the Home Office considered it was open to abuse. But the law was amended so the Home Office has to decide whether or not the entrepreneur applicant was a “genuine entrepreneur” which resulted in interviews being conducted. There is therefore an opportunity for the applicants to be heard. With Tier 1 Exceptional Talent category, the applicant needs to be endorsed by a body, e.g. the Arts Council. Perhaps if there are sufficient checks conducted on the applicant, either by the Home Office or a regulatory body, that can conclusively determine whether the applicant satisfies the Immigration Rules and anti-money laundering legislation.
Law of “legitimate expectation”
It is highly arguable that should the Home Office revoke all existing T1I visas in 2016 then this breaches the applicant’s public law rights – that they have “legitimate expectation” there visa category is subject to the rules in force at the time of their application. It is therefore unlikely that revocation of existing T1I visas will occur.
Possible impact on UK economy
£3.15bn of investment monies flowed into the UK since this investor scheme was opened in 2008. However, if there is only an average of 200 applicants applying each year generating £400m cash inflow, then it possibly will not make a big difference to UK’s current debt levels of about £1.56 trillion and to which it pays £43bn in interest every year. Nevertheless, creating trust for the public is important. Public trust in a company increases share value. The UK never defaulting on bonds before has probably incentivised investors to invest mostly in bonds rather than the other T1I options of share or loan capital. Trust between the public and the government whilst respecting the rule of law (i.e. fairness), then creates a safe hub where businesses can flourish. The T1I proposed rule change is likely to be debated in much more detail in the future at Parliament.
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