Migration Advisory Committee: Tier 1 Entrepreneurs – Review of the Tier 1 Entrepreneur and Graduate Entrepreneur routes

Some time ago the Migration Advisory Committee (MAC) published its report into the Tier 1 Entrepreneur and Graduate Entrepreneur routes. Given our participation with the MAC’s consultation we consider it necessary to inform our readers, subscribers, and prospective clients on the major provisions of the report, as the recommendations may be incorporated into the Immigration Rules shortly.

The MAC has been commissioned by the Government to review the Tier 1 (Entrepreneur) route with a view to ensuring that the potential economic benefit of the route is maximised and that the route is attractive to genuine entrepreneurs.

Law Firm Limited submitted written evidence to the MAC confirming our client’s economic benefit to the UK, by investing more than the required £200,000 into the UK and by having private medical insurance etc.

The MAC has recommended that the route be substantially reformed. At present these are only recommendations and will need to be considered by Government. However, it is highly likely that the Tier 1 (Entrepreneur) route rules will be changed in the coming months.

The recommendations are as follows:

Route objectives

• The Government should clarify the objectives of the route, whether it is to create jobs or whether to boost innovation and product design;
• The MAC recommends that the Government consider explicitly emphasising that the route aims to attract innovative entrepreneurs;

Third party endorsement

• The MAC recommend that the Government seeks to make greater use of third party endorsement where feasible;
• This could include accepting endorsements from other UK Government bodies, for instance the Scottish Government and/or UK Trade and Investment (UKTI);
• Examining the feasibility of approving a small number of angel investor networks or syndicates as third party endorsers;
• Applicants with third party endorsement should be eligible for a lower investment threshold (currently £50,000) and be exempt from the genuine entrepreneur test;
• Broaden the Tier 1 (Graduate Entrepreneur) category to a “Start-up visa”, with UKTI- approved accelerators allowed to endorse individuals and for the minimum investment for accelerators to be between £20,000 to £30,000;

Genuine entrepreneur test

• The MAC recommend that the Government examines alternative delivery options for the genuine entrepreneur test for applicants who do not have endorsement from a third party;
• Options could include, but are not limited to: 
• Appointing a panel of experts with expertise in early-stage entrepreneurship (e.g. accelerators, angel investors, venture capitalists) to review business plans; 
• Recruiting specialist immigration officers qualified to review business plans; 
• Working with other government departments to scrutinise business plans – e.g. UKTI or BIS; 
• Outsourcing business plan assessment to a professional business services firm.
• The Government may wish to clearly set out what this test aims to assess. The MAC suggests that this assessment should consider viability, scalability and innovativeness of the business proposal as well as the credibility of the individual, with an emphasis on skills, aptitude and business experience;

Investment thresholds

• The MAC recommends that the Government considers setting the lower investment threshold in the range £40,000 to £50,000 (this is for those who currently meet the £50,000 entrepreneur route);
• For the £200,000 entrepreneur route this should continue to apply at this level, however it could be raised slightly given that it has been unchanged since 2008;

Sources of funding

• The MAC recommend that the Home Office works with UKTI and the UKBAA to explore the feasibility of approving selected angel investor networks or syndicates to provide third party endorsement under the Tier 1 (Entrepreneur) route;

Selection criteria

• The MAC recommend that the Government introduces a broader emphasis on individual skills, qualifications and/or previous business history of the applicant in addition to the business plan;

Route restrictions

• Apart from the existing restrictions on property development, it is not clear that the Government should introduce blanket sector restrictions for the entrepreneur route;
• However, in order to ensure that Tier 1 (Entrepreneur) migrants are, on average, making a significant economic contribution, the Government may wish to consider the approach taken in Denmark, requiring that in addition to being innovative, the business established should be scalable and potentially global in nature. In Denmark this means that applications to set up restaurants, retail shops and import/export enterprises are not usually considered.

Role in the running of the business

• The current requirement that a Tier 1 (Entrepreneur) migrant must play an active role in the running of their business does not appear to be sufficient to ensure that, in addition to bringing their financial investment, Tier 1 (Entrepreneur) migrants are bringing their skills and labour to make their business a success;
• This means that, in some cases, the Tier 1 (Entrepreneur) route is used by some high net worth individuals as a lower cost alternative to the Tier 1 (Investor) route;
• If the Government chooses to restrict this ‘Investor-lite’ activity, we suggest that Tier 1 (Entrepreneur) migrants be required to demonstrate, particularly at the point of extension, that they will be or have been involved in the day to day running of the business;

Initial leave and monitoring

• The MAC recommends that the Government consider ways to introduce interim monitoring requirements;
• In particular, requiring that Tier 1 (Entrepreneur) migrants submit documentation at regular intervals (perhaps annually) to demonstrate the activity they are carrying out to grow their business;

Extension

• Whilst the requirement to have created two full-time jobs is a relatively modest threshold, it is also somewhat inflexible. Some high potential businesses will not require the addition of two full-time employees in their first three years, whilst low potential but well-funded businesses can easily meet this criterion for the sole aim of achieving extension or settlement;
• The MAC recommend that the criteria for extension set out a range of alternative measures that could each indicate business progress, including turnover and investment raised in addition to employment. There may also be an argument to consider the salaries paid to recognise those who create higher skilled jobs;

Entrepreneurial Teams

• The MAC recommend that the minimum investment thresholds be applied per main applicant in an entrepreneurial team;

Graduate Entrepreneur route

• The MAC recommend that the Government consider extending the initial leave to remain to two years (this is currently one year);
• The MAC also recommends that graduate entrepreneurs and/or those on a wider “Start-up visa” be allowed to switch into the Tier 1 (Entrepreneur) visa route if they already meet the route’s extension criteria as an alternative to demonstrating £50,000 of investment.

These are at present recommendations, however it is highly likely that the there will be a Statement of Changes to the Immigration Rules and that the Tier 1 (Entrepreneur) route will be changed.

Therefore, if you are thinking of entering the UK under the Tier 1 (Entrepreneur) route it would be advisable to contact us so that we can discuss your individual case in detail and advise you accordingly.

We will continue to keep you updated.