After the abolition of the investor visa in February 2022 – controversially described by some as ‘citizenship by investment’ − the promised replacement is still yet to be delivered. All the while the UK misses out on opportunities for direct investment in an already difficult financial climate.
The UK has had an investor visa since the mid-1990s with each reform in 2008, 2015 and 2019 making the requirements more stringent. Before its closure in February 2022, the investor 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.
In order to protect the UK’s immigration system from abuse the government has confirmed that no migration route should be available based solely on the applicant’s personal wealth. Thereby confirming the permanent closure of the Investor route.
Since the closure of the route the government has pledged to re-introduce an investment-based visa route but substantially modified to encourage better value for money for UK PLC and to weed out illicit wealth. However there has been a notable silence on when any new scheme may be opened.
In February 2022 we were told that the new route would require applicants to have evidence of experience investing in “innovative” businesses and it would have specific requirements for active investment into the UK, beyond what was in place previously. Basing a new scheme on the foundation of the Innovator visa means it is likely 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 allow the Home Office to redirect any negative media attention in the event of any allegations of failure to vet applicants. This follows its practice in other areas (outsourcing immigration control to employers and education providers via the sponsorship scheme for example).
The Home Office concluded in a review completed in 2022 that there were “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 Investor visa route were at high risk of having obtained wealth through corruption or other illicit financial activity. Any new scheme will likely therefore require proof that investment funds are not derived from the applicant’s passive or inherited wealth. The evidence of the efficacy of this approach is in doubt when it relates only to a “small minority” and proper vetting of source of funds and wealth would surely be sufficient rather than a wholesale ban on inherited or passive wealth generated funds.
One of the Home Secretary’s concerns was the risk of the immigration route not being equipped to evaluate the sources of wealth of applicants. Rather than immigration caseworkers, it would require specialist expertise in detecting financial criminality to evaluate applications as cases of financial crime are complex. Illicit funds can be linked to historical corruption or financial crime and may only be based on suspicion or allegation.
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.
Investment migration programmes allow countries to improve their public finances and support economic growth without increasing debt, however, they are subject to intensive criticism for allowing the purchasing of citizenship rather than through integrating into society. The UK investor visa was never a true citizenship by investment scheme as it required an applicant to live in the UK for a number of years to obtain citizenship, and was no different to the other UK immigration categories.
The government had originally said it would open a new route by the end of 2022, but nothing further has been announced since then. The economic downturn the UK is facing presents the government with an economic incentive to introduce an attractive investment-based immigration category sooner rather than later. The bigger concern is whether the new proposed route will be attractive. For those who have already decided that the UK is their location of choice, the immigration options are secondary as wealthy individuals will have a number of immigration options to choose from. For those comparing a number of different countries, the new proposed investment scheme may be less attractive than the schemes offered by alternative jurisdictions such as the US or Australia.