A Guide to the Innovator visa

By Gillian McCall - Barrister Partner

11 Mar 2019

On 7 March 2019, the Home Office announced the closure of the Tier 1 (Entrepreneur) visa category and introduced a new immigration category: the Innovator visa. This announcement has been much anticipated, since the Home Office indicated it intended to take this step back at the end of last year (also many of us have been awaiting an overhaul since the MAC review in 2015), but this is the first opportunity we have had to see what will happen to Entrepreneurs and what the requirements will be for Innovators.

The new Innovator visa category sits, sensibly, outside of the Points Based System in its own Appendix (Appendix W), along with the Start-up visa category. The new Appendix W is drafted in a similar style to Appendix V in that it is self contained and doesn’t send its reader off on a treasure hunt across the Immigration Rules. Appendix W is split into two parts: the general requirements for both Innovators and Start-ups, followed by specific requirements for each individual route. The general requirements applying to both routes are covered in a separate article here. This article will address the Innovator specific rules.

The headline changes from the old Entrepreneur category are that applicants will now need to be endorsed by a third party organisation, and that the investment funds requirement has been reduced from £200,000 to £50,000. There are also more stringent requirements that must be met before an individual can apply for settlement.

Endorsement as an Innovator

The new Rules state that endorsing bodies will be listed on the gov.uk website. The list of endorsing bodies has not yet been released, so we do not yet know how many bodies there will be or how they will make their assessment.

The endorsement must be made within the three months before the application is made. This will presumably work in the same way as for Tier 1 (Exceptional Talent) applicants where an application can be first made for endorsement and only if this is successful is the application for leave to be made. This has the advantage of allowing individuals to get an indication of whether they might be successful, before applying for leave. Where it differs from the Exceptional Talent category is that, getting the endorsement is not the end of the assessment of the applicant’s suitability.

The Home Office have set out a list of criteria for how an organisation can become an endorsing body. This includes:

• The organisation must demonstrate a proven track record of supporting UK entrepreneurs, including resident workers. (Exceptionally this requirement may be waived, for example where a new organisation is set up by another body which has its own track record.)
• The request to become an endorsing body must be supported by a UK or devolved government department as being clearly linked to that department’s policy objectives.
• The organisation must be able to competently assess applicants’ business ventures against the endorsement criteria set out in these Worker rules.

New Business

Individuals can apply to be endorsed by one of the endorsing bodies either under the new business criteria or the same business criteria.

An applicant may be endorsed under the “new business” endorsement criteria if either:

(i) The application is an initial application; or

(ii) The application is an extension application, and the applicant is pursuing a different business venture from the one that was assessed in the endorsement which led to their previous grant of leave.

Those applying under the new business criteria will need to demonstrate:

• Innovation: The applicant has a genuine, original business plan that meets new or existing market needs and/or creates a competitive advantage.
• Viability: The applicant has the necessary skills, knowledge, experience and market awareness to successfully run the business.
• Scalability: There is evidence of structured planning and of potential for job creation and growth into national and international markets.

The current entrepreneur rules require the business to be viable and there to be a plan for the business to scale to create at least two jobs, but the new requirement of innovation is arguably a departure from the current rules. However, the Home Office have long since discouraged less innovative businesses, albeit without having this requirement included in the immigration rules. It will be interesting to see how this requirement is applied in practice.

The endorsing body also has to be satisfied that the applicant will spend their entire working time in the UK on developing business ventures. This is a changed wording from the current requirement in the Entrepreneur Rules that an applicant genuinely intends to run their business and does not intend to take other employment. The new wording, is perhaps a more explicit signal that they are looking for individuals who are going to very active in developing their business.

Investment funds

The investment funds requirement has been reduced to £50,000. However, the ability of Entrepreneur team members to share funds has now been removed. If any Entrepreneurs want to apply as a team, they must have access to £50,000 each.

As in the current Entrepreneur rules, applicants can rely on investments that they have already made in their businesses, however, there doesn’t seem to be a time limit on this. Individuals in the Entrepreneur category can only rely on investments made within the 12 months before the date of the application.

The evidential requirements for investment funds have been simplified, but broadly have similar requirements to the current entrepreneur rules. Funds should have been held for 3 months or further evidence needs to be submitted from the person who provided the funds. Unfortunately the rules have not been updated to acknowledge that there are other sources of funds, other than a third party, e.g. from the sale of property, investment inheritance etc., which is acknowledged in the investor category, but apparently has not been included in the Innovator rules.

Same Business

An applicant may be endorsed under the “same business” endorsement criteria if both of the following apply:

(i) The applicant’s last grant of leave was in the Tier 1 (Graduate Entrepreneur), Start-up or Innovator category; and

(ii) The applicant is pursuing the same business venture that was assessed in the endorsement which led to that grant of leave.

There are a number of criteria against which a business will be judged in these circumstances. The endorsing body must be satisfied that:

• The applicant has shown significant achievements, judged against the business plan assessed in their previous endorsement.
• The applicant’s business is registered with Companies House and the applicant is listed as a director or member of that business.
• The business is active and trading.
• The business appears to be sustainable for at least the following 12 months, based on its assets and expected income, weighed against its current and planned expenses.
• The applicant has demonstrated an active key role in the day-to-day management and development of the business.
• The endorsing body is reasonably satisfied that the applicant will spend their entire working time in the UK on continuing to develop business ventures.

This appears to add a greater deal of flexibility to the assessment when applying for extension, than in the old Entrepreneur rules, as the business is judged against the goals the Applicant originally set, rather than some arbitrary benchmarks set by the Home Office at a fixed time period, that are not always appropriate for the business.

Indefinite Leave to Remain as an Innovator

In addition to meeting the criteria set out above for ‘same business’ applications, there are a number of further assessments that will be made, when an application is made for Indefinite Leave to Remain. There is a list of published criteria, and an individual must meet at least two of them:

• At least £50,000 has been invested into the business and actively spent furthering the business plan assessed in the applicant’s previous endorsement.
• The number of the business’s customers has at least doubled within the most recent 3 years and is currently higher than the mean number of customers for other UK businesses offering comparable main products or services.
• The business has engaged in significant research and development activity and has applied for intellectual property protection in the UK.
• The business has generated a minimum annual gross revenue of £1 million in the last full year covered by its accounts.
• The business is generating a minimum annual gross revenue of £500,000 in the last full year covered by its accounts, with at least £100,000 from exporting overseas.
• The business has created the equivalent of at least 10 full-time jobs for resident workers.
• The business has created the equivalent of at least 5 full-time jobs for resident workers, which have an average salary of at least £25,000 a year (gross pay, excluding any expenses).

As with the criteria set out above, this appears to offer much more flexibility than the current Entrepreneur Rules, because applicants only need to meet two criteria. This means that if you have invested your funds and applied for intellectual property protection, you don’t need to show that you have created any jobs or have any particular level of turnover.

Overall, though, the criteria seem harder to meet than the previous entrepreneur rules. If you want to rely on job creation, you need to have 10 jobs, or 5, if they are paid over £25,000. This is potentially a more difficult task than the two jobs (of at least minimum wage) that are required for an Entrepreneur to apply.  That said, those with additional funds to invest should not find it particularly onerous.  As with the Entrepreneur rules, the jobs must exist for 12 months before the date of application and be full time (30 hours per week).

Contact our Innovator Immigration Barristers

For expert advice and assistance with an application for entry clearance, leave to remain or settlement as an Innovator, contact our business immigration barristers in London on 0203 617 917 or via our enquiry form below.