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24 June 2022

Investments and Financial Instruments – what are the risks?

The Immigration Rules have long provided routes for high-net-worth individuals to gain entry to the UK, be it by investment or innovation. While these routes have granted opportunity, they also expose the applicant to risk if they do not fully understand their financial obligations or instruments.

The applicant’s obligations 

The Tier 1 (Investor) route, which closed to new applicants on 17 February 2022, is one particular route that is full of pitfalls which could lead to the refusal of extension and indefinite leave to remain applications. The investor rules state that permission may be curtailed (cancelled) if the applicant fails to invest at least £2 million in qualifying investments within 3 months of entry or grant of permission.

Issues have arisen where an investor may think they have fulfilled this requirement, but in fact they have invested in a start-up company that was not yet active and trading (according to a tight definition of what this means) and as such it was not a qualifying investment and further permission could be refused. Another example is an investor who is investing in their own company, who may mistakenly believe that by transferring funds to a UK bank account to later fund their business they have ‘invested’ in the UK. This again would not be a qualifying investment until it is invested in the business.

Although you can no longer enter the UK via the Tier 1 (Investor) route, there is the potential for confusion over financial obligations for clients who wish to extend their leave. Moreover, a new investor route is expected to open later this year which is also projected to impose strict financial requirements that can lead to refusal or curtailment of leave if they are not met.

In addition, it is not only high-net-worth investors who are at risk of misunderstanding their financial obligations. Other visa routes, such as applying for a spouse visa extension, have a financial element (applicants must prove a minimum combined salary, which increases if you have children).

The consequences of a mistake

The application for extending leave as an investor includes a section titled ‘details of your investment’, where you must select how you have fulfilled the investment requirements. As applications includes a signed declaration, the onus is on the applicant to ensure that the answers to the questions and the documents they rely on are accurate.

Answering the questions on the application form correctly is important because, if the applicant is accused of deception for not providing a correct answer, it can result in future entry clearance applications being refused for ten years. This can be devastating for those who have created a life in the UK and who did not intend to be deceptive in their application, particularly if they had relied on the advice of trusted immigration or financial advisors to ensure their application was compliant.

A degree of discretion?

Although the repercussions for failing to meet visa requirements can be severe, case law has shown some positive outcomes for applicants who have proven that a refusal for leave to enter or remain was through no fault of their own.

The reasoning behind the Secretary of State exercising its discretion in these circumstances is demonstrated by R (on the application of Teisha Forrester) v SSHD [2008], which stated that:

“It is one thing to say that one should have a fair and firm immigration policy, it is quite another to say that one should have an immigration policy which is utterly inflexible and rigid and pays not the slightest regard to the particular circumstances of the individual case” [13].

Thus, the Secretary of State has a discretion that should be exercised “with a modicum of intelligence, common sense and humanity” [7].

Professional negligence

In relation to negligence by a representative, in FP (Iran) v SSHD [2007], it was held that the sins of the representative should not be left at the door of the application in every circumstance. This is due to the fact that:

“it is evident that the Rules in their present form are capable of working irreversible injustice on people who have done nothing wrong. The undoubted fact that the Rules take this form in order to eliminate manipulation of the system by individuals (and sometimes their advisers) whose aim is to avoid finality or seek some improper advantage explains but cannot by itself justify the breadth of their effect”.

If the applicant wished to bring action against their advisor in the form of a professional negligence claim, they would need to establish that: (i) a duty of care was owed by the professional; (ii) the professional breached that duty; and (iii) that breach caused a loss.

The success of any claim may also be contingent on whether the loss was caused by factors other than the conduct of a financial or immigration advisor.

What can be done?

The onus remains on the applicant to ensure they do not knowingly deceive the Home Office in their application. However, solicitors working as immigration advisors or banks providing financial documents still have a duty of care that may be breached. For example, a 2020 Law Society report detailed how an immigration solicitor was struck off the roll by the Tribunal for misleading his clients and faking correspondence.

Even if an applicant is not seeking to bring a professional negligence claim to its conclusion, evidence of the breach of their advisor’s duty, which causes a loss (of employment or life in the UK) could be beneficial when asking the Secretary of State to exercise its discretion.

Ultimately, applicants should ensure they answer questions truthfully, fully understand the products they are investing in and the financial obligations their leave is contingent on. Nevertheless, case law has shown that in particular circumstances, discretion may be exercised in their favour.

If you intend to extend your leave as an investor, or your application has been refused as a result of these issues, our Citizenship and Immigration Team is on hand to assist you.

FP (Iran) v SSHD [2007] –

R (on the application of Teisha Forrester) v SSHD [2008] –

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Francesca Sargent
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Matt Ingham
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