UK Investor Visa: Interest and Dividends, Fees, Transaction Costs and Tax
It is well known that in order to qualify for an extension of stay and/or settlement, Tier 1 Investor visa holders must maintain a qualifying investment of at least £2 million, £5 million or £10 million for a specified continuous period of 2, 3 or 5 years. During this time, interest may be accrued, dividends may be declared, fees and transaction costs may be incurred and liability for tax may arise. In this article we look at how both interest and dividends generated by a Tier 1 Investor’s qualifying investments and the costs associated with maintaining a portfolio of investments are treated by the UK’s Immigration Rules.
Tier 1 Investor Visa: Treatment of Interest and Dividends
Under paragraph 65C(c)(i) of Appendix A to the Immigration Rules, a Tier 1 Investor visa holder may withdraw interest accrued and dividends declared on their qualifying investments after the date on which they purchased the qualifying investments in their portfolio.
The only restriction that investors need to be aware of is that they must maintain the qualifying investments themselves. In other words, accrued interest and dividends payments may be withdrawn without impacting on the Tier 1 Investor visa holder’s immigration status provided that qualifying investments of at least £2 million (or £5 million or £10 million if on an accelerated route) are maintained in the UK.
Tier 1 Investor Visa: Treatment of Fees, Transaction Costs and Tax
The position in relation to fees, transaction costs and tax is not quite so straightforward.
Under paragraph 65C(c)(ii) of Appendix A to the Immigration Rules, fees, for example those charged by wealth management companies for managing investment portfolios, cannot be paid from the Tier 1 Investor visa holder’s qualifying investment. The same principle applies to transaction costs and tax incurred through the buying and selling of investments.
Therefore, investors are not permitted to pay their investment manager’s fees, or transaction costs or tax incurred through buying and selling investments from their £2 million (or £5 million or £10 million) investment funds for which they are claiming points. If they do so then they will be treated as not having maintained their qualifying investment.
However, paragraph 65C(c)(iii) of Appendix A to the Immigration Rules goes on to provide an important qualification to the basic rule. Paragraph 65C(c)(iii) states that if the Tier 1 Investor visa holder has invested more than the required level in qualifying investments, then any associated fees, transaction costs and tax may be paid from the surplus investment, providing the surplus investment was made at the same time as, or before, the fees, transaction costs and tax were incurred.
By way of example, if an investor visa applicant scores points for investing £2 million in qualifying investments, but actually invests £2.1 million in qualifying investments, then they may pay up to £100,000 in fees, transaction costs and tax from their investment funds. However, the investor must have invested £2.1 million at or by the time s/he pays these costs. It is not possible to pay out of a £2 million investment and then invest a further £100,000 at a later date to compensate.
With the above in mind, individuals applying for a Tier 1 Investor visa may wish to consider investing more than the minimum qualifying investment amount of £2 million. If they do so then they will later be able to pay any fees, transaction costs or tax (up to the value of the excess) out of their investment funds and still fall to be treated as having maintained their qualifying investment.
Contact our Investor Visa Immigration Lawyers
For expert advice and assistance regarding an application for entry clearance, leave to remain or settlement as a Tier 1 Investor, contact our investment immigration barristers on 0203 617 9173 or via our online enquiry form below.