I’m sure we have all moaned about the UK for one reason or another, usually the weather or something our politicians have done or some ridiculous ruling by the courts being blamed on the human rights act.
However, the fact remains that the UK is a very attractive country to many other individuals around the world and because we all live here full time, I believe we are all a little guilty of under-appreciating the positives of holding a UK passport or holding the ‘Indefinite Leave to Remain’ (ILR) stamp.
We are all aware of the lack of housing stock in certain parts of the UK (in particular Central London) which is mostly blamed on the fact that wealthy individuals from abroad are buying up these big houses in Knightsbridge & Kensington but the fact they are spending their money here rather than elsewhere is also generating huge amounts of tax revenue to the Chancellor.
The UK Government are mindful of the benefits to the UK economy of encouraging wealthy individuals to spend their money here and pay tax here in the UK, hence why they offer these wealthy individuals a simple way into becoming a regular taxpayer, by offering them the opportunity of eventually having their very own British passport through the Tier 1 Investor Visa scheme.
What’s the Criteria?
Essentially, You must hold money of your own, under your own control in a UK regulated financial institution and disposable in the United Kingdom amounting to no less than £1m. It must be unencumbered and needs to be invested within 90 days of arriving in the UK with your Tier 1 Investor Visa or if you are already here, then the 90 days will start from the date the Visa is granted.
If you borrow the £1m it can not be secured against another asset, and if you do borrow, then you have to evidence that you have a further £2m net assets after any liabilities. Obviously, the government is trying to ensure that you have sufficient wealth so as not to become a burden on our own state services.
Initially, the Tier 1 Investor Visa is granted for three years and four months and then the applicant must complete a continuous residence period of 2,3 or 5 years before they will be eligible to apply for settlement in the UK. The duration of this period depends on the amount of investment, as follows:
- Continuous residence period of 5 years if: The applicant has an investment in the UK of at least £1m.
- Continuous residence period of 3 years if: The applicant has an investment in the UK of at least £5m.
- Continuous residence period of 2 years if: The applicant has an investment in the UK of at least £10m.
After the initial three year period the applicant applies for an extension of stay beyond the initial period and subsequently applies for permanent permission to remain in the UK. It is at this point where the evidence of quarterly statements from your investment managers to show you have maintained the necessary level of investment at each quarterly point (or if under one quarter, then you have made good the difference by the following quarter) will be crucial.
What types of Investment are allowed?
Of course the whole idea of investor visa is to attract wealthy foreign nationals to the UK and they contribute to the UK economy/tax take. Therefore the investment must be on-shore, no collectives such as Unit Trusts, Investment Trusts, ETF’s or OEIC’s are allowed, nor any form of structured products.
Remember these rules are written by politicians, not investment experts, so the list of allowable investments are very basic, such as UK Government gilts, shares or corporate bonds of companies that are incorporated here in the UK. No more than 25% can be held in cash (so in reality, you only need to invest 75% of either the £1m, £5m or £10m in more volatile UK assets) and companies engaged in property investment, property management or property development are prohibited.
While the client is required to hold a minimum investment at all times, they can trade, so do not have to stick with the same investments throughout the whole term, but the 75% rule applies at all times.
The Cynical View
Some cynics amongst us may view this whole exercise as the British government selling British passports. But next time you are standing at the airport about to go on holiday – passport in hand, or bemoaning the state of the country’s economy or roads when stuck in a traffic jam and the terrible weather, just give a thought to the real value that others would place on swapping places with you and how fortunate you are to own one of the most respected documents in the world.
By Dean Mullaly, senior Partner – IFA, UK & International, Mark Dean Wealth Management
