KNOWLEDGE

Extending an Entrepreneur visa

MortonFraser_Stuart McWilliams
Author
Stuart McWilliams
Partner
MortonFraser_Averil Trimble.
Author
Averil Trimble
Senior Solicitor
PUBLISHED:
09 February 2015
Audience:
category:
Blog

When a visa application has been granted there is a temptation for the individual to breathe a sigh of relief and not consider what happens next until near the expiry date of the visa. As an immigration solicitor, I don't recommend this approach, particularly in the case of the Tier 1 (Entrepreneur) visa where the extension requirements are complex and one small error can have devastating consequences.

On the face of it the Immigration Rules seem to suggest that extending a Tier 1 (Entrepreneur) visa is a simple matter with all that is required being:

  • The Entrepreneur has invested £200,000 (or £50,000 in some cases) in their UK business; and
  • The business has created two full time jobs for settled workers.

However, as with many aspects of immigration law, the devil lies in the detail and if someone is not aware of other aspects of the rules then they may not be able to extend their visa. I have seen a number of cases in the past, where due to a small misunderstanding, it has not been possible for someone to extend their visa.

Common issues encountered are:


1) Use of third party funds

The Immigration Rules allow entrepreneurs to rely on funds from third parties to enable a visa to be extended where the investment has been made by someone other than the visa holder. However, care needs to be taken to ensure that the investment is made in the correct manner to avoid the Home Office taking the view that the investment is not to be considered when assessing an extension application.

Any funds from a third party must be invested into the UK business by the visa holder, or "on his behalf". This means that where the funds are transferred directly from the third party to the business it must be done on behalf of the visa holder. This can cause confusion, particularly where a third party has invested funds into a business in exchange for share capital. In order for someone to extend their Tier 1 (Entrepreneur) visa where they are relying on funds from a third party they must ensure that the company accounts state the investment was made on their behalf. This will likely require the third party to agree to this wording being inserted into the accounts and should be considered before any funds are invested.


2) Funds invested in the form of a loan

A visa holder is entitled to invest funds into their business by way of a director's loan but will need to take care when they do so. This is because the Home Office will only consider this as a valid investment where the visa holder provides:

  • A copy of the legal agreement between the visa holder and the UK company showing the terms of the loan, the interest payable and the period of the loan; and
  • Evidence that the loan is unsecured and subordinated in favour of 3rd party creditors. If the investment is secured against any of the company's assets or the visa holder cannot provide the above evidence then the Home Office will not consider the funds to have been properly invested in the UK business and the visa extension application will fail.


3) Funds invested in a way that is not allowed by the Immigration Rules

In order to be considered a "qualifying investment", funds invested in the company cannot be used to pay the visa holder's wages or expenses. They also cannot be used to buy the business from another person, as these funds would not be invested into the business itself. Whilst it is currently possible to rely on funds which have been used to buy property for the business the business itself cannot be involved in property management or development. Therefore, it would not be acceptable for a Tier 1 (Entrepreneur) to set up a business renting out or developing flats.

A Tier 1 (Entrepreneur) is entitled to set up a business which operates a B&B but care needs to be taken to properly value the investment as the Home Office will make deductions if any of the property is used by the visa holder for residential purposes.


4) Job creation

In order to meet the job creation requirement, the roles must have existed for 12 months before the visa holder applies for an extension. This means that, as a minimum, the jobs must be created within the first 2 years of the visa if the visa holder is to be able to extend the visa. The Home Office will also only consider the period of time where a settled worker fills a particular role. So, for example, if the first employee holds a job for 6 months and then leaves and there is a 1 month gap before the second employee starts and works for 5 months, the Home Office will only consider this role to have existed for 11 months.


Summary

Applying for an extension of a Tier 1 (Entrepreneur) visa is not a straightforward process and there are a number of pitfalls that applicants need to be aware of.  It is recommended that any Tier 1 (Entrepreneur) visa holder takes legal advice about the extension requirements at an early stage and uses this to plan their investment.

Disclaimer

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers.  Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.