The UK government has pushed ahead with a proposal to double the minimum threshold of the country’s Tier 1 investment visa to £2 million ($3.2 million). Lawyers give their reactions.

The UK government has pushed ahead with a proposal to double the minimum threshold of the country’s Tier 1 investment visa to £2 million ($3.2 million). The measure comes against a background of various jurisdictions such as Malta and Spain rolling out immigration programmes for wealthy individuals in recent years. (To see a recent article on how jurisdictions are competing and are seen by outsiders, click here.)

A number of law firms have commented on the reforms; here is a selection of reactions:

Nick Rollason, immigration law partner at Kingsley Napley: "In a pre-election year, we were unlikely to see a major overhaul of the Tier 1 Investor route so today's announcement is hardly surprising. While the increase to £2 million might be seen as a deterrent by some, initial research of our investor clients planning to come to the UK  in 2015 and 2016 has shown that the increase will not have a significant impact on the decision to come to the UK - this will continue to be driven by the major sell factors of the UK as a major education, business and cultural hub.”

“However, the new requirement to invest the full £2 million into the portfolio of specified investments is an unexpected change. Previously investors have only had to put 75 per cent of their investment into this portfolio and could keep the balance in assets in the UK. While in reality, many of our investor clients did put the full amount into their portfolios, many more used the 25 per cent towards the purchase of property in the UK,” Rollason continued.

“The increase of the minimum investment amount to £2 million may deter `budget’ investors but it will have little effect on the high net worth investors the UK and in particular London, continues to attract. Similarly, the removal of the ‘loan option’ is unlikely to make a huge impact as this was not popular with our clients and was difficult to do in practice.  The main effect of the loan option being stopped may be felt by Chinese investors who have used the loan option due to  current restrictions on taking capital out of the PRC,” he said.

“However the increase is likely to mean those coming as Tier 1 investors will look for greater returns from their UK investment and as a result wealth managers may need to look beyond offering gilts only portfolios for this market. The removal of the requirement to ‘top up’ if a portfolio drops below £2 million is a welcome change and there will only be a requirement to purchase new qualifying investments if an investor sells part of their portfolio. This will allow Tier 1 investors to take greater risks with their investments,” he added.

At Withers, the firm’s head of European immigration, Philip Barth, said: “The government has taken on some of the Migration Advisory Committee’s changes but it appears that it wasn't prepared to take them all on-board. It's disappointing that no changes have been made to the current class of ‘qualifying investments’ in order to comply with the rules. It's widely felt that these are too restrictive, and the MAC made a number of recommendations to broaden this class to bring more targeted economic benefits to the UK. The government has declined to grasp this issue and instead will initiate a formal consultation on this 'in due course', but probably not in time to implement before the 2015 election.”

Barth welcomed the removal of the “topping-up” rule, which he said penalised investors twice in the event of a sustained drop in the stock market; and welcomed the end of the 75:25 split of how the funds could be invested, with up to £250,000 allowed to be invested in any assets (including property). “This change is really just the correction of an anachronism from 20 years ago, when £250,000 could buy a reasonable apartment in central London,” he said.

Mark Estcourt, head of international wealth and immigration at London & Capital, the wealth management firm, was generally positive on the changes.

“The changes to the Investor Visa programme announced today by the Home Office will bring about a welcome shake up to the way investor visas currently operate and perform. We believe increasing the threshold to £2 million will create the opportunity for greater portfolio diversification, allowing investors to benefit from a more sophisticated approach to their investment strategy. Unlike other investment managers we have preferred an active approach to our clients rather than a passive gilt-based solution,” he said.

“With the £1 million portfolio, fixed income managers were typically able to invest in around 15-20 corporate bonds. The new £2 million portfolio, can be spread across 25-30 corporate bonds. We feel a threshold increase provides an opportunity for greater investment earnings and the chance to achieve an uplift in returns through longer term investment planning.”

“A £2 million portfolio will also provide the flexibility to allocate more strategically across sub-asset corporate bond classes (such as high yield, financial and investment grade) depending on where the best value is seen, rather than being narrowly focused on the lower risk end.  We feel that gilts offer our clients a poor solution in the current market environment.”