After increasing speculation the Home Office has today turned its attention to the Tier 1 Investor visa. In a surprise announcement the visa route will be suspended from midnight on Friday 7 December 2018 until an audit has been carried out. The route, used by high net worth clients to enter the UK, has long been the subject of concerns about its potential use for organised crime and money laundering. The visa enables those with access to a minimum of £2 million to invest these funds in the UK and to live and work in the UK for the duration of their visa which will lead to settlement.
The suspension of the route will be in place until new rules are introduced "in 2019". These will require applicants to provide comprehensive audits of their financial and business interests, and show they have had control of the £2 million investment funds for at least two years. This will concern applicants who currently only have to show source of funds for three months. However in practice as many applicants rely on funds held for many years this will not impact them. The changes will also stop applicants investing in government bonds, which do not bring returns for the country, and require investment in active and trading UK companies. The latter will concern wealth managers whose compliance teams are already grappling with how to comply with Home Office requirements to confirm that investments have been made in accordance what the complicated investor rules.
The route, turned to increasingly in recent years given political uncertainty in certain areas of the world, has also been used since the Brexit referendum by high net worth individuals who hold European passports, for example in Malta. Such passports will not necessarily allow clients to come into the UK from 1 January 2021.
In times where many counties are actively rolling our programmes to welcome high net worth individuals what this means in practice remains to be seen. What is clear is that the government is becoming increasingly strict on high net worth individuals "playing by the rules". This is further underlined by the increasing use of Unexplained Wealth Orders (UWOs) to prove that a person's assets are not the proceeds of crime. UWOs have yet to truly be a game-changing enforcement tool and it remains to be seen if the Tier 1 Investor Visas will remain competitive. The draw of UK education and the housing market may be enough to combat any uncertainty brought by these changes, but the government will need to be clearer in its messages to HNWs going forward to encourage investment.
