Demand falls for investor visas to UK
06 June 2016
Popularity of ‘golden visa’ regime dented by higher costs, stricter rules and more competition, reports the Financial Times.
The number of foreign investors moving to Britain dropped more than 80 per cent during the year to March, as the popularity of the “golden visa” regime was dented by higher costs, stricter rules and more competition.
Turmoil in emerging markets also hit demand for investor visas, ending a recent surge in applications led by wealthy Chinese and Russians seeking bolt holes abroad.
Only 35 Chinese citizens were granted Tier 1 investor visas in the year to March, compared with 488 the previous year, when they accounted for nearly half of all the investor visas granted.
The number of Russians, the second largest group, fell from 196 to 34 over the year, according to recent figures from the Home Office.
Although some advisers warn that the country risks making itself appear unwelcoming to foreign investors, critics say the rules are too generous. Sir David Metcalf, head of the government’s independent migration advisory committee, said in January that British taxpayers got nothing in return for encouraging wealthy foreigners to come and live in the UK. He said: “There is very little in it for the UK, there is a huge amount in it for the investor.”
The sharpest drop in applications came after November 2014 when the government increased the amount of money that investors needed to put into UK gilts, shares or corporate loans from £1m to £2m. The number of visas granted fell from 471 in the final quarter of 2014 to 57 in the first quarter of 2015.
The figures for the first quarter of 2016 show a further 26 per cent fall to 42, compared with the first quarter last year. Since the UK government tightened source-of-wealth checks last year on Tier 1 investor applicants, the number of visas issued to individuals from countries with a high corruption risk has fallen sharply.
Nick Rucker, a partner of Irwin Mitchell Private Wealth, an advisory firm, said an economic “bloodbath” in emerging markets had played a big part in reducing demand. “A lot is down to the global economy and uncertainty.” He said the imposition of new rules in April 2015 requiring applicants to have a UK bank account — and undergo the bank’s due diligence procedures — before applying for a visa had made it harder to do so. The increased investment requirements had especially affected clients from countries such as China and India, where currency controls made it hard to take money out of the country, he added.
Mark Davies, managing director of Mark Davies & Associates, a tax consultancy, said the downturn was driven by “a combination of lots of different factors”. He said the tougher investment requirements had affected some applicants, particularly those hit by a fall in the value of the rouble or other currencies. “Currency [movements] probably had a bigger effect than anything else,” he added. He highlighted increased competition between the UK and other EU nations offering golden visas or passports, including Portugal, Malta and Cyprus.
London law firms say that as many as three-quarters of their clients seeking so-called investor passports go to Malta and Cyprus rather than use the UK’s more onerous system.
Planned changes to the tax advantages offered to “non-doms” — UK residents whose permanent home is outside the UK — were also a factor in deterring some foreign investors from moving to the UK, he said. “We definitely had people who were looking at the UK and changed their minds.”
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