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UNITED KINGDOM: Various Developments Have Been Announced

Various developments have been announced.

Tier 1

Changes to the UK Tier 1 (Investor) immigration category were announced on October 16, 2014, by the Home Office. The changes were effective as of November 6, 2014, and are in response to the Migration Advisory Committee report of February 2014, which recommended significant changes to the category.

The key changes are:

  • The initial investment threshold has increased from £1 million to £2 million.
  • New investors are no longer able to allocate 25% of their investment in UK assets such as UK property in which they live. The entire £2 million will need to be invested.
  • The loan option has been removed.
  • Topping up of investments accounts is no longer required if the invested amount falls below the required level. However, if investments are sold, they will need to be replaced within the same reporting period.
  • Source of funds: visa officers can refuse investors if they have reasonable grounds to believe the funds were obtained unlawfully or if they have concerns about the character and conduct of the party "providing the funds." This could extend to those gifting the funds to the investor.

Action required by potential investors. Advisors, wealth managers, and other high net worth intermediaries are advised to discuss the changes with potential clients who are considering coming to the UK under the Tier 1 Investor category.

Commentary. While the increase in the investment threshold to £2m may have a deterrent effect at the budget end of the investor market, the increase is not likely to have a significant impact on their decision to come to the UK, which will continue to be driven by the "sell factors" of the UK as a major education, business, and cultural hub.

Similarly, the removal of the "loan option" is unlikely to have a huge impact as this was not popular with applicants. The main effect of the loan option being stopped may be felt by potential Chinese investors who have used the loan option due to current restrictions on taking capital out of the People's Republic of China.

The new requirement to invest the full £2 million into the portfolio of specified investments and the exclusion of investment of up to 25% of the overall amount into a UK home is an unexpected change. In practice, however, many investor clients have invested the full amount into their portfolios.

However, the increase is likely to mean that those coming as Tier 1 investors will look for greater returns from their UK investment, and as a result wealth managers may need to look beyond offering gilts only portfolios for this market. The removal of the requirement to "top up" if a portfolio drops below £2 million is a welcome change, and there will only be a requirement to purchase new qualifying investments if an investor sells part of his or her portfolio. This will allow Tier 1 investors to take greater risks with their investments.

Entry Clearance Officers will also have greater discretion when considering applications to refuse if they have concerns about the control the applicant has over the funds, the lawfulness of the source of funds, or the character of the person who has provided the funds, if a third party. It is likely that investors will need to provide more information on the source of funds to preempt queries at the visa stage. There may therefore be a greater role for wealth managers to play in confirming that the client has been successfully on-boarded by a UK-regulated institution.

The government's statement that it will consult further on what sort of investments may deliver real economic benefits to the UK was welcome. To broaden the investment options beyond gilts is overdue and could have a positive effect on charities as well other financial instruments.

Meanwhile, according to the Home Office's latest Statement of Changes to the Immigration Rules, other key changes as of October 16, 2014, affecting Sponsors include:

Tier 2 

  • The Home Office will now assess whether a genuine vacancy exists for Tier 2 (Intra-Company Transfer) and Tier 2 (General) applications. This change empowers Entry Clearance Officers and in-country caseworkers to refuse an application where there are reasonable grounds to believe that the job described by the Sponsor does not genuinely exist, has been exaggerated to meet the Tier 2 skills threshold, or (with respect to Tier 2 (General)) has been tailored to exclude resident workers from being recruited, or where there are reasonable grounds to believe that the applicant is not qualified to do the job. As the Sponsor Licence Unit already performs this function when assessing Restricted Certificate of Sponsorship (RCoS) applications, it would appear to be a duplication of effort if Entry Clearance Officers will also perform this genuine vacancy assessment. For those migrants earning more than £153,500, the Resident Labour Market Test requirements do not apply in any event.
  • An existing requirement in the published guidance for Sponsors is that Tier 2 Migrants cannot be sponsored to fill a position, undertake an ongoing routine role, or provide an ongoing routine service for a third party who is not the Sponsor. This requirement is being replicated in the Immigration Rules. This enables applications by individuals for entry clearance or leave to remain, and applications by Sponsors for Restricted Certificates of Sponsorship, to be refused in line with any wider compliance action relating to the Sponsor in question. This applies to so called "contract cases" where migrants are based at a client site. It is of particular significance for the IT sector. These cases will now incur greater scrutiny to ensure that there is a genuine provision of services by the Sponsor and not disguised employment by the third party.
  • A change is being made to the Tier 2 (General) provisions for extension applications where the applicant is continuing to work in the same occupation for the same sponsor. Such applicants are exempt from the Resident Labour Market Test and currently the exemption only applies if the applicant still has current leave as a Tier 2 (General) Migrant when he or she files an extension application. The change will enable the applicant to benefit from the extension if his or her previous leave as a Tier 2 (General) Migrant expired no more than 28 days before filing the extension application.
  • A temporary provision, dating back to 2009, that waives the £20,500 minimum salary threshold where companies are reducing their employees' hours to avoid redundancies, is being removed.

Tier 2 (Sportsperson) and Tier 5 (Temporary Worker—Creative and Sporting)

The UK is changing the table of governing bodies to include information on which Tier(s) each body may endorse applicants in. The list of sports governing bodies is also being updated.

Tier 5 Youth Mobility Scheme

The annual allocations for participating countries are being set for 2015. There is an increase in the allocations for New Zealand (16%).

Business Visitors

A new category has been added for overseas lawyers who are employees of international law firms that have offices in the UK. The change will allow such business visitors to directly advise clients in the UK on litigation or international transactions provided they remain paid and employed overseas.

These changes were effective November 6, 2014.

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