What new requirements were brought into force for investors from 6 July 2018?
The immigration rule changes on 6 July 2018 brought in two amendments to the investment maintenance requirements for Tier 1 Investors. The first relates to the treatment of the interest and dividends—while investors can withdraw interest and dividends generated after the purchase of UK investments—they cannot withdraw any accrued interest or dividends included in the price of the asset when it is purchased.
The second requirement relates to the contents of the supporting letter which must be provided with the portfolio reports by a Financial Conduct Authority-regulated wealth manager when an investor extends their visa or applies for indefinite leave (permanent residence). The letter must now specify that the investments were made in accordance with the provisions of the rules on qualifying investments and that no loan has been secured against the relevant investments.
What are the practical issues with these changes?
In relation to the accrued interest and dividends—which are included in the initial purchase of the portfolio assets—the new rules mean that the investor and their wealth manager will now need to ensure that where an asset is sold, any accrued interest or declared dividend which existed when the asset was purchased must be reinvested into the portfolio. It will mean that, if the Investor wishes to withdraw interest and dividends arising under the portfolio (for example to pay for on-going management fees) the wealth manager will need to:
- separate pre and post-purchase interest and dividends
- re-invest an amount equivalent to the purchase date interest or dividend included in the asset
- only distribute post purchase interest or dividends
In relation to the letter, banks and wealth managers will now need to provide letters which confirm that all investments made were in compliance with the immigration rules on qualifying investments. Confirming that gilt-only portfolios meet these requirements is fairly straightforward. However, wealth managers running discretionary managed portfolios that contain equities and corporate bonds will need to be satisfied that each company invested in is a UK ‘trading company’ which:
- has a UK corporate presence
- has a UK bank account
- pays tax in the UK
Where wealth managers or banks do not have a pre-vetted basket of qualifying assets which have been pre-cleared as compliant for use in Tier 1 Investor portfolios, providing this confirmation may be difficult.
How are immigration advisers and wealth managers dealing with the changes in practice?
These changes make managing Tier 1 (Investor) visas more unattractive for wealth managers, who may be more likely to offer gilt only portfolios where this makes providing the required confirmation letter and managing interest or dividend issues simpler.
Our advice to prospective investor clients and those already in the UK on an investor visa is to contact their wealth manager to ensure that they can provide the required letter in the format.
For all clients investing in discretionary managed portfolios, they should agree a clear mandate to ensure that the wealth manager only purchases qualifying assets and deals with withdrawal of interest or dividends according to the rules. Investors should ensure that there are sufficient additional funds over and above the £2m investment to cover costs, annual management fees and transaction charges.