Should I choose Tier 1 Entrepreneur or Innovator?

By Gillian McCall - Barrister Partner

27 Jan 2020

Although the Tier 1 Entrepreneur category is closed to new entrants, those who hold leave in the Tier 1 (Graduate Entrepreneur) route currently or have held it in the last 12 months are still able to apply to enter the Tier 1 (Entrepreneur) route and therefore will need to make a choice about whether to apply as an Innovator or a Tier 1 (Entrepreneur), if they wish to continue their business in the UK. Additionally, there may be some individuals who are already in the Tier 1 (Entrepreneur) category who may be better served by switching to the Innovator route, rather than remaining in the Tier 1 (Entrepreneur) category. In this article we will look at the pros and cons of both categories. 

For those who have held leave in the Tier 1 (Graduate Entrepreneur) category within the last 12 months, or who have been switched from Tier 1 (Graduate Entrepreneur) to Start-up and are deciding between Innovator and Entrepreneur there are a number of factors that you may wish to take into account when deciding which route is best:

Requirements for initial application

Historically, the Tier 1 (Entrepreneur) category had a high refusal rate, largely due to overly technical evidential requirements that were hard to meet where funds are held by third parties, and partly due to the wide discretion afforded to decision makers when assessing the genuineness of a business proposition. This historic problem is now somewhat mitigated by the fact that there is no longer a genuine entrepreneur test for initial entrants, and the risk of refusal can be reduced further by planning investment funds in advance to ensure that the evidential requirements can be met. 

Comparatively, the Innovator category has a high success rate, however we are still looking at a very small sample size of those who have actually got to the stage of making an application. The first stage of making these applications is to apply to an endorsing body and so far no endorsing body has published the proportion of their applicants which are successful. This means that looking at success rates alone may not be the best approach. 

In terms of the other requirements, applicants might want to bear in mind the following other requirements:

When applying to enter the Innovator category, someone who has held leave in the Graduate Entrepreneur or Start-up categories will have the option to apply on the basis of the business which they have already started running in the UK (‘same business’) or an entirely new idea (‘new business). The main advantage of the same business criteria is that on this route, there are no investment funds required. This could be a real advantage for someone who is running a business with potential, but who does not have the £50,000 required for the Entrepreneur category.

However, they will need to find an endorsing body which potentially has no previous involvement with the business to confirm that 

• The business has shown significant achievements judged against the original business plan
• The business is sustainable for the next 12 months 
• That the applicant has demonstrated an active key role in the day to day management and development of the business
• That the applicant will spend their entire working time on developing business ventures

This is in addition to confirming that the business is active, trading and that the applicant is registered as a director or member with Companies House. 

As the category is so new, we don’t yet know how willing endorsing bodies will be to give such endorsements to existing companies, of which they have had no involvement in the development. In order to confirm that the business is sustainable for the next 12 months an endorsing body may wish to see that there are funds available to the business to sustain it, if there are not guaranteed orders in place. This means that while there is no minimum investment funds requirement, an endorsing body might reasonably require that you can show some back up funding, unless there is clear evidence that the business is able to sustain itself.

Route to Settlement 

The route to settlement will be an important consideration for both those already in the Entrepreneur category who are thinking of switching to the Innovator route, and for those deciding between entering either the Entrepreneur or Innovator following a grant of leave as a Graduate Entrepreneur. 

The Tier 1 (Entrepreneur) route has two options: firstly, a standard route to settlement of five years. The Entrepreneur will need to invest their £50,000 and create two jobs in the business which exist for 12 months each. After three years they will need to make an extension application and then subsequently maintain the two jobs or create two new ones for another 12 months. After this and subject to meeting the residence requirements, an application for indefinite leave to remain can be made. Those following this route will need to be mindful of the closing dates for Entrepreneur extension and settlement applications of 5 July 2025 and 5 July 2027 respectively (which are later than for other Entrepreneurs). The Tier 1 (Entrepreneur) route has very strict rules on the evidence that needs to be provided in support of the application. 

The second option is to make an accelerated settlement application on the basis of having generated a turnover of £5 million in the business, or alternatively having created 10 jobs which have existed for 12 months each. 

For those in the Innovator category, their first chance to make a settlement application also comes after three years in the category. However, in this case there is more of a ‘pick and mix’ approach to the requirements. Applicants will need to meet at least two of the below:

1. At least £50,000 has been invested into the business and actively spent furthering the business plan assessed in the applicant’s previous endorsement.
2. 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.
3. The business has engaged in significant research and development activity and has applied for intellectual property protection in the UK.
4. The business has generated a minimum annual gross revenue of £1 million in the last full year covered by its accounts.
5. 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.
6. The business has created the equivalent of at least 10 full-time jobs for resident workers.
7. 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).

This gives a business much more flexibility than the Entrepreneur category. An Applicant can still meet the ILR requirements in three years by investing £50,000 and creating 10 jobs, but they could also do it by creating only 5 jobs if they are paid at least £25,000. For someone switching from Graduate Entrepreneur this means the requirements are exactly the same, however, for someone who entered the Entrepreneur category without being a Graduate Entrepreneur, this could allow them to meet the rules, but by investing £50,000 rather than £200,000.

They could also meet the ILR requirements without creating any jobs at all, just by applying for intellectual property protection as well as investing the £50,000. 

For some, the five year route to settlement in the Entrepreneur category will seem like the more straightforward option, but it is worth considering your business needs and assessing whether the Innovator route can offer a route to settlement which is either quicker, or fits better with the overall business strategy. 

Contact our Immigration Barristers

For more information on the Tier 1 (Entrepreneur), Start-up or Innovator routes, contact our immigration barristers on 0203 617 9173 or info@richmondchambers.com.