UK Business Immigration – proposed changes to the Tier 1 business category

Business Immigration: – proposed changes to the Tier 1 entrepreneur category under the immigration rules-

The Tier 1 Entrepreneur category of visa requires a minimum investment of at least £200,000 for an applicant to apply for entry clearance to the UK, or a variation of leave to remain. After leave to remain in this country for a period of five years in this category, an applicant can apply for permanent residence and a year after the grant of such residence can apply for British citizenship. This category of visa caters for applicants coming to this country to set up, take over, or be involved in full-time managerial capacity having made the investment, in the running of a business. The main requirements of the immigration rules remain the same. There are minor changes proposed,

At present, for job creation, an applicant needs to show there will be a benefit to the UK economy in creating jobs. The applicant must employ either British citizens or permanent residents of this country or EU citizens exercising treaty rights of work here, for at least 12 months prior to any application to extend the Tier 1 entrepreneur visa for a further period.

Therefore, during the currency of the first period of leave to remain, the applicant should show that jobs have existed for at least 12 months prior to the date of the application for an extension of stay. It should be noted that after the first period of leave of some 2 ½ years, an applicant can apply for an extension of stay for a further period and after the total period of five years can then apply for permanent residence also known as indefinite leave to remain.

Changes with respect to job creation requirements for those applicants who made applications under this business category before 6 April 2014 are at present are in the process of being drafted and there will be transitional arrangements incorporated into the immigration rules which will apply to extensions and settlement applications in this category made before 6 April 2019.

As part of the proposed changes in job creation, applicants (employers), will be required to inform the Home Office the number of hours that they have paid employees in the jobs for the appropriate period, as well as the hourly rate.

In my view the above is unnecessary, and suffice it the contract of employment . Employment would confirm full-time employment or part-time as a case may be, which in any event will undoubtedly deal with the above requirements as part and parcel of the contract , together with evidence of payslips and funds being transferred by the employer, for example to the employees bank account for the appropriate period, and P 60 documentation and evidence of the nationality of the employees for the appropriate period. This evidence should suffice. To ask employers to calculate the exact number of hours employees are paid is unnecessary and a superfluous exercise in an already complicated lengthy application process, and will not encourage applications under this category, and nor will it add to the requirement to show a genuine entrepreneurial test.

The period before the Tier 1 applicant joined the business, to set it up, take it over or be involved in its running will be required to be explained in further detail. This is to be in preference to the period before jobs were created. That makes little sense because the business plan or cover letter accompanying the application would be required in any event to show the need for the business in the particular area where it is proposed to set it up and why, and also dealing with the competition in the chosen area if any. The requirement of the genuine entrepreneurial test introduced in the Immigration rules covers these details and it is not necessary to have a rule specifically on this issue.

Third parties can, of course, provide funding for the business of the applicant, and again it is adding further complication to what is already known that where funds are currently held by another business which is providing those funds as third parties to the business of the applicant, that evidence in that regard should be provided as to the bona fides of that third party.

Where an investment has been made from a venture capital organisation which has considered the appellant’s business plan before agreeing to provide the investment, in return for a share of the business, for example, a letter from the Corporation will be required confirming the date the funds were transferred to the applicant or invested in their business. Again, this is not something new because where funds are transferred to a business then obviously the date of the transfer and how the funds were invested will be required. The funds need to be subjected to the business and therefore subordinated to third-party creditors. It must be part and parcel of the business, and cannot be removed from the business. These matters are already in place.

To prevent recycling of funds and therefore the possibility of money laundering, the changes being made are to prevent applicants not to be in a position to rely on funds or investments that have already been provided by another tier 1 entrepreneur migrant to another business, or by an applicant’s close family member to another business. Who is to be considered as a close family member will depend on a number of circumstances. This is an unfair provision in my view, as there are many ways of considering whether the investment is a genuine investment or not. It may very well be that there are genuine reasons for a third party to have already made an investment to two or three other Tier 1 organisations, but that should not prevent the Tier 1 applicant from benefiting from that investment. Venture capital investment is a prime example.

On 19 November 2015, the statement of changes in immigration rules HC 535 provided that investments in the form of director’s loans subordinated to third-party creditors should be evidenced through transactions in the applicant’s business bank statements. Apparently, the changes being made only apply to investments made after 19 November 2015. No particular reason has been given for that. I find this proposal unnecessary. A director’s loan agreement between the director concerned and the company together with the accounts of the v=business evidencing the directors’ loan should suffice. The only advantage of it appearing in the applicant’s bank statements is I suppose to then see how it is treated in terms of the investment into the company, as such loans must be subordinated to third-party creditors,

Applications for registration of the business with Company’s House must still take place within six months of the date of the applicant entering the Tier 1 category whether it is by way of entry clearance or a variation of leave to remain. There was an intended provision to state that it would take effect within eight months of the same date but the removed that provision was seen as sensible.

The immigration rules still provide in somewhat of a redundant way that Tier 1 post-study workers can switch to Tier 1 entrepreneur status. This is a redundant statement and arrangement relating to applicants switching are sensibly being removed because such leave as a Tier 1 post-study work migrant was granted for two years and the category was closed on 6 April 2012 in any event and is no longer relevant.

A qualifying investment will not include buying the business from its previous owner. Therefore, any business that is purchased from its previous owner is not going to qualify as a qualifying investment, under the new proposals. Again, that limits the scope of purchases. It is not a good idea. It does not make commercial good sense.

In conclusion, most of the proposed changes in the Tier 1 entrepreneur category are unnecessary and confusing. There are not “changes” in reality as many are in fact already in implementation in everyday applications made by legal representatives who specialise in this area and accepted by the Secretary of State when considering them. If there is information that has been provided but not in full, then the evidential flexibility [policy allows the Home Office to require further information before a decision is made.