The Government’s zeal to cherry-pick investors to the UK appears to have led to a steep decline in the number of applications for Tier 1 investor visas, according to recently released Home Office data.
Comparing the second quarter of 2015 with the same period last year, the number of investor visa applications has plummeted 82%, probably due largely to investors being put off by the November 2014 increase in the investment required to qualify for a Tier 1 investor visa from £1 million to £2 million and steps taken to increase taxes and stem avoidance.
2014 also saw a surge in Tier 1 investor visa applications from Chinese nationals. 357 investor visas were issued to Chinese nationals for the year ending 30 September 2014. This compares with the 178 such visas issued in the previous 12 months.
The investor visa programme allows high net worth individuals to ‘fast track’ their route to British citizenship if they are willing to make a substantial financial investment in the UK. This had been an attractive option for wealthy families looking to settle permanently in the UK.
In return (and provided other conditions are met), those with investor visas become eligible to extend their visas, and ultimately apply for indefinite leave to remain after five years and British citizenship after six if certain residence requirements are met. That process can be further accelerated by making investments of £5 million or £10 million.
It appears as though the new rules, added, perhaps, to the Government’s attempts to crack down on perceived tax avoidance and the highly charged rhetoric concerning non-doms, may have made the investor visa a less attractive option than the alternatives on offer in other countries. Most EU countries now provide a form of investment-based citizenship, with which the UK will need to compete. At a cost of £2 million, the UK investment visa is among the more expensive of the EU options.
Between April and June, 2015, only 44 applications in total had been submitted for Tier 1 investor visas. Rewind back to the same period in 2014, 251 people had lodged an application. First quarter figures were also low. Between January and March, 2015, just 58 applications had been received.
International professional development association, STEP, said: “The decline is probably an after-effect of the spike of applications received towards the end of last year [2014]. Many investors rushed to submit their applications prior to the increase of the minimum investment, which increased from £1m to £2m ($3m, €2.7m) back in November 2014.”
STEP added that the number of Tier 1 investor visa applications currently received in 2015 is “by far the lowest since 2010.” They went on to say that it could be the “first sign that the progressive limitation of non-dom [a UK resident whose permanent home/domicile is based outside of the UK] tax advantages is dissuading people from inward investment.”
Mark Davies & Associates, a tax consultancy firm, said: “The steep decline could be attributed to an increase in competition between the UK and other EU nations offering visa programmes that also lead to an EU passport.”
Using Cyprus as an example, the firm described how an investor applicant can obtain a full EU passport within three months, while in the UK, an investor visa requires a five-year commitment. Other countries, such as Portugal, expect a much lower minimum investment.
The firm’s managing director, Mark Davies, said: “In my opinion, the UK government has misjudged the competition that the UK’s Tier 1 investor visa programme faces. It’s my belief that for an investor programme to be successful, it must be synchronised with tax policy.”
Mr Davies added: “In the build-up to the General Election in May, the taxation of ‘non-doms’ was a topical issue, which culminated in George Osborne’s summer budget. The budget proposed a radical change to the rules that would restrict the benefits for non-doms to 15 years.”
A number of commentators have alluded to the fact that just as other authorities are mirroring the UK’s remittance basis for foreigners, the UK has decided to restrict a tax system that had previously stimulated foreign investment.
