The UK government recently suspended its popular Tier 1 Investor visa program, only to revoke the suspension days later.
The turnaround raises concerns about how the UK permanent residence by investment program is being operated.
Intending to carry out a major and thorough reform of the program, the UK Home Office announced the suspension of the Tier 1 Investor visa with effect from December 7, 2018.
Proposed reform measures included:
- Comprehensive and independent audit of applicants’ financial and business interests by regulated UK-based audit firms.
- Requiring applicants to submit proof of control of the minimum investment requirement for at least two years.
- Excluding government bonds as an eligible asset class for investment immigrants.
- Restricting equity investments to active and trading UK companies only.
- Net eligible asset class of government-regulated pooled investments offering clear economic benefits to the UK.
Changes like barring investments in gilts sought to push foreign investment into riskier and more productive asset classes of the UK economy.
Most investment immigrants, even aggressive Chinese investors, prefer low-risk options offering capital protection and an assured route to economic citizenship or permanent residence.
With no major reforms or changes introduced since 2014, the move was being viewed as the UK government’s response to widespread concerns about security risks arising from citizenship by investment and permanent residence by investment programs in the EU.
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Yet, in an extremely unusual move, the program’s suspension was revoked days later and it was business as usual as far as Tier 1 investors were concerned.
The government made all the right noises about improving due diligence and emphasizing the visa program’s potential to contribute to the economy.
Yet, bringing the program back online in just a few days without introducing any significant change or reform, is likely to raise more concerns among critics of the program.
All the government has said is that they remain committed to the reforms and that announcements will be made in due course.
Implications for the Program
If there is one thing that wealthy investment immigrants hate more than adverse rule changes is the uncertainty caused by speculation.
Numerous countries have, in the past, introduced tougher rules for their investment immigration programs. Australia’s Significant Investor Visa barred residential real estate purchase as a qualifying investment. Ireland doubled its minimum investment limit from €500,000 to €1 million.
Currently, the UK program offers permanent residence in five years for those investing £2 million. Those investing more, £5 million and £10 million, need to wait for just three and two years respectively.
UK Tier 1 Investment Requirements
|Apply for indefinite leave to remain after 5 years and 4 months||Invest £2 million in UK government bonds, share capital or loan capital in active and trading UK registered companies|
|Apply for indefinite leave to remain after 3 years||Invest £5 million in UK government bonds, share capital or loan capital in active and trading UK registered companies|
|Apply for indefinite leave to remain after 2 years||Invest £10 million in UK government bonds, share capital or loan capital in active and trading UK registered companies|
Government bonds is an eligible investment and the economy gains more from the indirect economic impact of inflow of such foreign investments.
Going ahead, investors are likely to brace for tougher requirements, especially related to proof of ownership of the investment capital and choice of qualifying asset classes.
The flip-flop has made it impossible for the government to retain the surprise element of introducing such reforms.
In the short term, the rule-change confusion may lead to a temporary surge in demand as investors may hurry to submit applications before tougher rules are introduced.
In the long run, requiring investors to invest in riskier assets and comply with tougher due diligence may hurt demand and cause applicants to move to other cheaper, safer, and less restrictive options within and beyond the EU.General Information: Contact us to receive more information about this article.
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