We are often contacted by foreign entrepreneurs looking to launch a new venture in the United Kingdom and secure a Tier 1 Entrepreneur visa. The purpose of this article is to explain what activities are eligible and what types of businesses are ineligible under the Tier 1 Entrepreneur visa category.
Ineligible Investments in Tier 1 Entrepreneur Visa Cases
For the purpose of the Tier 1 (Entrepreneur) rules, investment and business activity does not include investment in any residential accommodation or property development or property management, and must not be in the form of a director’s loan, unless it is unsecured and subordinated in favour of the business.
Property development is defined as any development of property (real estate) owned by the applicant or his business to increase the value of this property with a view to earning a return either through rent or a future sale, or both.
Property management is defined as the management of property (regardless of who owns it – whether or not it is owned by the applicant or his business) for the purposes of renting it out or for resale.
The principle is that business income must be generated from the supply of goods and/or services, and not derived from the increased value of property or any income generated from property, such as rent.
The restrictions on investment in property development and property management are intended to ensure that the Tier 1 (Entrepreneur) route is used to promote United Kingdom competitiveness in business. This restriction does not, however, prevent you investing in companies that are mainly involved in construction.
Money deposited in a bank account, even if it is in a United Kingdom business bank account, is not counted as investment in business. The money should be used in the business, for example to encourage growth or expansion, or to improve services or products.
Eligible Investments in Tier 1 Entrepreneur Visa Cases
The investment may be made in any of three ways:
- Direct cash investment: which must appear in the business’s accounts, not simply as cash in the bank: this form of investment may only take place where it is a company of which the applicant is a director, or a partnership of which they are a member),
- Director’s loan: only if it is unsecured and subordinated in favour of the business, and
- Shareholding: with a company whose structure permits it to issue shares. The shareholders must be identified – either via the company accounts, or via a copy of the register of members from Companies House.
The business must be a UK business: ie with a registered office in the UK (unless the applicant is self-employed and there is no business office; multi-nationals count so long as they have a registered or head office here), trading within the UK economy, with a UK bank account and subject to UK taxation.
Some kinds of investment are expressly excluded in the Immigration Rules (r245D(c)(ii)):
- Anything that contributes to the Entrepreneur’s own remuneration
- Buying a business from a previous owner where the payment goes to the previous owner, directly or indirectly, rather than into the business
- Investing in businesses other than the one that being operated on a self- employed basis or as a director
- Anything that is not directly for the purpose of establishing or running the applicant’s own business
In Anjum  UKUT 406 (IAC) a Tier 1 Entrepreneur Visa application was refused as the visa officer concluded that the entrepreneur was effectively paying the previous owner for their business. However, the Upper Tribunal noted that the entrepreneur was not proposing to engage in the prohibited activity of purchasing “the” business from someone else – rather, he was proposing to acquire another online retail entity which would be added to and amalgamated with his existing online business. This would entail investment in and expansion of his existing business, which was a legitimate form of investment under UK immigration law.
Tier 1 Entrepreneur Visa Advice
Sterling Immigration’s team are experts in drafting persuasive Tier 1 Entrepreneur business plans and immigration applications. We will also prepare you for your Tier 1 Entrepreneur Visa interview and ensure that you pass the “Genuine Entrepreneur Test”.
For more information please schedule a legal advice session with us.