Uk Economy
Until 17 February 2022, the UK has had an investor visa since the mid-1990s Reuters

In dramatic fashion, Priti Patel, then Home Secretary, closed the UK Tier 1 (Investor) visa route on 17 February 2022. The closure was in response to Russia's invasion of Ukraine.

The UK had an investor visa since the mid-1990s. It went through reformations in 2008, 2015 and 2019, each time making the requirements more stringent. Before closure, the Tier 1 route required applicants to invest no less than £2 million in qualifying investments. As long as the applicant maintained their investment, the route would lead to permanent residence after five years (and in some cases, two or three years depending on the sum invested) and then eventually naturalisation as a British citizen.

Since the closure of the route, the government has pledged to re-introduce an investment-based visa route. Initially due to open in the autumn of 2022, then spring of 2023. We are now unlikely to see the introduction of any such route before September 2023.

We expect to see a further iteration of the investor visa route. We expect the new route will require applicants to have evidence of experience investing in "innovative" businesses. It is likely to have specific requirements for active investment into the UK, beyond what was in place previously. This may include investments into specific types of UK companies and the need to prove that investment funds are not derived from the applicant's passive or inherited wealth. We also expect the Home Office to increase the minimum level of investment from the previous threshold of £2 million.

We expect that the Home Office will require third parties to vet and verify applicants' funds in order to provide endorsements for a visa application to be made. This would seek to allow the Home Office to redirect any negative media attention in the event of any future failings to vet applicants.

These expected changes are a result of the government's final response to a review of applicants who had entered the UK under the Tier 1 route since 2008. The review considered 6,312 Tier 1 applications in a bid to investigate whether the route was facilitating abuse of money laundering regulations through potential links to criminality or other risk factors.

Through the review and ongoing monitoring of the Tier 1 route, the Home Office concluded that there are "inherent difficulties in an investment-based immigration route based on passive wealth". The results of the review confirmed that a "small minority" of individuals connected to the Tier 1 visa route were at high risk of having obtained wealth through corruption or other illicit financial activity.

The review identified that the old route attracted a disproportionate number of applicants from countries identified in the UK's National Risk Assessment of money laundering and terrorist financing 2020.

Before more stringent checks were introduced in 2015, hundreds of individuals entered the UK from 'high-risk countries' without their funds or identities being verified, and have since gained permanent residence or British citizenship. This is known as the 'Blind Faith Period' – over 3,000 individuals entered the UK between Q1 2008 and Q1 2015, investing at least £2.95 billion into the UK economy.

The key issue confirmed by the review was that the Home Office was not equipped to evaluate the source of wealth of applicants. The review found that specialist expertise in detecting financial criminality would be required to evaluate applicants' sources of wealth.

The Economic Crime (Transparency and Enforcement) Act 2022 is designed to address concerns regarding foreign investment in the UK as part of the government's wider strategy to tackle money laundering in the UK by foreign individuals. The Act introduces a Register of Overseas Entities in order to deliver transparency regarding overseas owners of land and leases in the UK. The Act also extends Unexplained Wealth Orders to include "responsible officers" of entities that own property as well as creating an alternative test for the granting of such orders. The aim of the Act is to increase the standards of diligence for overseas wealth entering the UK. A further consequence, for investor visas, will be to ensure that they are secure against potential abuse.

The economic downturn the UK is facing presents the government with an economic incentive to introduce an investment-based immigration category. Investment migration programs allow countries to improve their public finances and support economic growth without increasing debt. To remain competitive a new UK investor route should be introduced sooner rather than later.

By Kathryn Bradbury & Mark Jones Kathryn Bradbury AND Mark Jones

Kathryn Bradbury is the Head of Citizenship & Immigration at Payne Hicks Beach. She has been working in the immigration field exclusively since 2001 and practices in the broad spectrum of UK immigration and nationality law. Kathryn is regarded in the industry as a leading immigration lawyer in her specialist field of law. Kathryn advises high net worth individuals in applications under all categories of the UK immigration rules. Her experience includes applications under the rules relating to partners, and children, including adoption and surrogacy. Kathryn also acts in complex human rights applications. Kathryn also represents clients in a broad range of appeals to the First-tier Tribunal (Immigration and Asylum Chamber) and to the Upper Tribunal.

Mark Jones, Partner, Dispute Resolution, Payne Hicks Beach specialises in criminal and regulatory defence work and investigations for both individuals and corporates. His work is often multi-jurisdictional with a particular focus on the US and Far East, as well as often being complex and high profile. He regularly deals with clients who have complex problems which require a multi-disciplinary approach. Mark's investigations practice covers matters being investigated by a wide range of authorities such as the SFO, FCA, HMRC and CPS as well as other regulators. In addition to his white-collar practice, Mark conducts internal investigations for corporates concerning whistleblowing or alleged wrongdoing, as well as representing employees in internal investigations and interviews.