Can Investors and Entrepreneurs invest in property?
When is an investment in residential property, or a property-related business, a permitted investment for the purpose of applying for, or extending, a Tier 1 Investor or Entrepreneur visa? Can investors and entrepreneurs invest in residential property? How about investment in businesses involved in property construction or property refurbishment? Or estate agencies? Or hotels? In this article, we examine when residential property-related investment is, and is not, permitted under the Immigration Rules for investors and entrepreneurs.
Purchase of residential property
Prior to 6 November 2014, Tier 1 Investor visa holders were permitted to allocate up to 25% of their investment funds to the purchase of assets, which could include the unmortgaged portion of their own home. This option is still available to investors who entered the Tier 1 Investor visa category prior to 6 November 2014, but for everyone else, Table 8A of Appendix A to the Immigration Rules now requires the full value of the investment funds to be invested in UK government bonds, share capital or loan capital in active and trading UK registered companies.
This amendment brings the Immigration Rules for Tier 1 Investors into line with the rules for Tier 1 Entrepreneurs, which have always required Entrepreneur visa holders to invest the full value of their investment funds in cash directly into one or more businesses in the UK. Paragraphs 46-SD(d) and 47 of Appendix A to the Immigration Rules also prevent Tier 1 Entrepreneurs from purchasing residential accommodation through their company, confirming that investment and business activity does not include investment in residential accommodation.
Investment in residential property-related businesses
For most Tier 1 Investors and Tier 1 Entrepreneurs, therefore, the requirements for an extension of stay and settlement will not be satisfied through the purchase of residential property. But can Tier 1 Investors and Tier 1 Entrepreneurs achieve settlement in the UK through investment in property-related businesses?
Paragraph 65(c) of Appendix A to the Immigration Rules confirms that an investment made in a company mainly engaged in property investment, property management or property development is not a qualifying investment for the purpose of the Tier 1 Investor route. Paragraph 47 of Appendix A similarly provides that investment and business activity does not include investment by a Tier 1 Entrepreneur in any residential accommodation, property development or property management.
These provisions appear to prevent Tier 1 Investors and Tier 1 Entrepreneurs from investing, for immigration purposes at least, in any company that invests in property, manages property or develops property in the broadest sense. However, a closer reading of the rules and guidance published by UK Visas and Immigration reveals that there is some scope for investors and entrepreneurs to invest in property-related businesses.
Paragraph 47 of Appendix A to the Immigration Rules for Tier 1 Entrepreneurs defines ‘property development’ and ‘property management’ as:
any development of property owned by the applicant or his business to increase the value of the property with a view to earning a return either through rent or a future sale or both, or management of property (whether or not it is owned by the applicant or his business) for the purposes of renting it out or resale.
The Tier 1 Entrepreneur Policy Guidance similarly defines property development and property management at paragraph A21 of Annex A as follows:
We define property development 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.
We define property management 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 above provisions make clear that, for the purpose of Tier 1, the core principle is that business income must be generated from the supply of goods and/or services, not from increased property values or rent. Investment in companies whose main function is to own or manage land or buildings, rather than supply goods and/or services, is not permitted.
Therefore, at the extension and settlement stage, points will not be awarded where an investment is made in a company which purchases the title to a property, develops the property and then earns a return through selling the property, renting it out or both. Equally, points will not be awarded where an investment is made in a company which manages property, whether or not owned by the company, for the purpose of renting it out or resale. This would exclude investment in, for example, a property letting agency or a company engaged in the management of student accommodation.
However, where the revenue of the business is generated through the supply of goods or services, rather than from an increase in property value or through rent, then investment in a property-related business is permitted and will qualify for an awards of points when applying for an extension of stay or settlement as a Tier 1 Investor or Tier 1 Entrepreneur.
This in turn means that it is open to Tier 1 Investors and Tier 1 Entrepreneurs to invest in a wide range of property-related businesses, including but not limited to:
- Construction firms, where the main commercial activity from which business derives its income is the building of property;
- Property refurbishment businesses, where the company does not own the property which is being improved;
- Hotels, where the property is not being rented out and guests do not sign a tenancy agreement;
- Real estate agencies, providing that the estate agency is only engaged in marketing property and is not involved in letting properties or acting as a landlord.
If you are a Tier 1 Investor or Tier 1 Entrepreneur considering an investment into a property-related business, you should therefore ask yourself one question: how does the business derives its income? If the income of the business follows from the sale of goods or services rather than increased property value or rent, then the investment is likely to qualify for the purpose of extending your stay and achieving settlement in the UK.
For advice and assistance with applying for a Tier 1 Investor or Tier 1 Entrepreneur visa on the basis of investment into a property-related business, contact our immigration barristers and lawyers in London on 0203 617 9173 or via our online enquiry form.