When is an investment in residential or commercial property a permitted investment for the purposes of Tier 1 Visa regulations?
Prior to 6th November 2014, Tier 1 investor holders were permitted to allocate up to 25% of their Investment funds to the purchase of varying assets which could include the un secured portion of their family home. For all applicants from the 6th November 2014, Table 8A of Appendix A requires the full value of the investment capital to be invested in UK bonds, share or loan capital in active and trading UK Companies. Tier 1 Entrepreneurs are restricted from property investments with the requirement being that Entrepreneurs must invest the full value of their available capital directly in to the running of the business in the UK. Paragraph 45 (i) of Appendix A prevents the Tier 1 entrepreneurs from purchasing residential property through their company: if the applicant has bought property as part of their business investment, the value of any residential accommodation cannot be included. The applicant must provide an estimate of the value of the residential accommodation if it is part of the premises also used for the business. The valuation must be from a surveyor who is a member of the Royal Institution of Chartered Surveyors, and dated within the three months before the date of application.
The purchase of commercial property or companies engaged in property related businesses pose similar difficulties. Para 65 ( C ) of Appendix A ( Qualifying Investments ) confirms that investment is excluded where the investment is into companies mainly engaged in property investment, property management or property development (meaning in this context any investment or development of property 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 for the purposes of renting it out or resale). The principle is that business income must be generated from the supply of goods and/or services and not derived from the increased value of property or any income generated through property, such as rent.
The most recent guidance Tier 1 Investor, which can be found here, states:
Points will not be awarded if this business will be mainly engaged in property development or property management. Property development in this context means any development of property owned by the migrant or their business to increase the value of the property, with a view to earning a return either through rent or a future sale or both. Property management in this context means the management of property (whether or not it is owned by the migrant or their business) for the purposes of renting it out or resale. The principle is that business income must be generated from the supply of goods or services and not derived from the increased value of property or any income generated through property, such as rent.
It is clear that the Government wishes to see the investment into genuine business activity with the core principle being that the income generated from the business must come from the supply of goods and / or services and not from increase in property values or rental income.
It is however permissible for companies / Investors & Entrepreneurs to invest into property related businesses for example : Hotels, boarding houses, homeless and charitable hostels, estate agencies provided that agency is only concerned with the marketing of the property and not the rental, construction firms, warehousing and storage to name just a few examples.
It is always worth considering property related businesses for genuine investment purposes and provided the business derives its income from the provision of goods And services, then the investment could very well be permissible for the purposes of the Tier 1 Programmes. More information about tiers and tier points is available here.
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