WHY APPLY FOR TIER 1 (ENTREPRENEUR) LEAVE AND WHAT DOES THIS ROUTE OFFER?
In this chapter, we will look at what the Tier 1 Entrepreneur route entails and what its main benefits are.
The Tier 1 Entrepreneur route has been part of the Points-Based System of the Immigration Rules since 2008. It effectively replaced the ‘businessperson’ and ‘innovator’ categories, which existed prior to that. On 6th April 2012, the Tier 1 (Post-Study Work) category was also closed and to replace it, the Tier 1 (Entrepreneur Graduate) category was created. We will not cover this category in detail within this guide, but we will see in the second and third chapters of this guide how this category may often be used to ‘feed in’ to a Tier 1 Entrepreneur application.
The Immigration Rules providing for this route can be found in Part 6A and specifically in paragraphs 245DB-245F. These are to be read in conjunction with paragraphs 35-52 of Appendix A of the Immigration Rules. An applicant needs to score 75 points under the ‘attributes’ criteria contained in Appendix A as well as 10 points for English language and 10 points for maintenance funds, reaching a total of 95 points.
The Home Office currently operates two forms of guidance for Tier 1 Entrepreneur applications. These are as follows and are available from the government’s website:
Tier 1 (Entrepreneur) of the Points Based System – Policy Guidance, version 07/2018 for applications made on or after 6th July 2018
Tier 1 (Entrepreneur) – Version 21.0, published on 16th January 20181
If you need to consult the Home Office guidance, it is best to check both publications as some matters are dealt in one but not the other. On the whole however, I have found the second piece of guidance more helpful as the first one tends to paraphrase the requirements that are already set out in the Immigration Rules while the second one tends to share a bit more of the case-worker’s decision-making process. Older versions of each piece of guidance can also be accessed from the government’s archive website and it is important to ensure that the right piece of guidance is consulted and relied upon depending on the timing of the application and ensuing decision.
If you or your client wants to set up a new business or run an existing business in the UK, being a Tier 1 Entrepreneur may be the route for you. The route is designed to encourage investment in the UK economy and to attract dynamic and skilled entrepreneurs to this country. A minimum of £50,000 is required for the purposes of investment. However, since the category’s inception, further restrictions have been placed limiting the source of funding for those who seek to rely on making £50,000 available for investment. We will see in the third chapter of the guide that applicants will not face such restriction if they have access to £200,000 for the purposes of investments as part of their business activity.
As part of this route, those who qualify for initial leave to enter or remain will be allowed to reside in the UK for a period of up to three years and four months, if granted entry clearance, and three years if granted when already in the UK. During this time, such persons will be expected to set up, take over or join the running of one or more businesses and to work for their business, including as a self-employed person, as a director or as a partner. They may also apply for their family members to accompany or join them in the UK. The conditions on their stay once granted will forbid applicants from working outside of their business, for example by being employed somewhere else and from having recourse to public funds2.
After three years, a person may extend their leave to a further two years after which they will be entitled to apply for indefinite leave to remain provided they can demonstrate that they satisfy the relevant criteria, which will be looked at in detail in the third chapter of this guide. There is also the option of applying for permanent residence under what is known as the ‘accelerated route’ after having held the status of Tier 1 Entrepreneur for only three years, again if certain and fairly onerous criteria are met, which will also be looked at in the third chapter of this guide.
The main advantage of this route is that the substance of the applicant’s business is entirely at their discretion, save for a restriction concerning residential and property development and management, which is considered in more detail in the second chapter. Otherwise, there may be restrictions placed upon them depending on the source of their funding but aside from this, an applicant would be free to set up or run a business in, more or less, whatever sector they wish. A large part of their application to the Home Office will initially rest on their business plan but as long as the applicant can justify their plans and projections, they have a wide choice of business sector.
Similarly, if the applicant’s initial business venture fails or does not prove profitable, they should have time within the initial three years of their leave to formulate alternative business plans and to try and start again. The Home Office does not require an applicant to stick to their original business plan throughout their residence in the UK. With this in mind, an applicant will need to meet the requirements of the ‘genuineness’ test, which are covered in the fourth chapter of this guide, and evidence the various investments made into the relevant business. Thus, it is important to retain records and to try and document an applicant’s journey as an entrepreneur as fully as possible.
The second advantage is that you can apply as a part of a team of two. This means that two applicants can team up and set up a new business or take over or join an existing business together as business partners. The main benefit is that the team members do not each have to possess the full amount of funding but instead, they are able to pool their respective funds together for these to add up to the required amount. They do not even have to each invest an equal amount of money as long as they have and have had an equal level of control over the funds earmarked for the business and on-ward investment, which we will look at in further detail in section b) of the third chapter in this guide.
The third and important advantage is that the funds, which are needed to qualify as a Tier 1 Entrepreneur and which will need to be invested in the business do not necessarily need to be the applicant’s own funds. The entirety of the funds or part of these funds can be provided by what is known as a ‘third party funder’. This may be a person known to the applicant, such as a family member or benefactor but also a person unrelated to the applicant who may have an interest in seeing the applicant’s business venture started. Such third-party funding may also come from a UK or devolved government department, venture capital firm funding or UK seed competition funding. There are detailed evidential requirements to accompany any application based on third-party funding, also looked at in the third chapter of this guide, but this, in principle, does make the Tier Entrepreneur application route more accessible.
Having set out the main advantages and benefits of this points-based system (PBS) route, practitioners and those who wish to make an application need to be aware that the Immigration Rules providing for this route have been drafted in a very protracted and proscribed manner.
The complexities of the PBS have already been recognised by certain Court of Appeal judges when handing down judgments in several cases. In addition, on 17th April 2018, Lord Justice Irwin observed that “the Immigration Rules are, in truth, something of a disgrace”. His comments were given in the context of the Peter Taylor Memorial Lecture for the Professional Negligence Bar Association3.
Earlier in 2018, as part of the judgment in Mudiyanselage v Secretary of State for the Home Department  4 WLR 5,  EWCA Civ 65, Lord Justice Underhill also stated that “the web of Rules and Guidance has become so tangled that even the spider has difficulty controlling it”4. Underhill LJ had also stated in an earlier case – Singh v Secretary of State for the Home Department  All ER (D) 146 (Feb),  EWCA Civ 74 – that “the aim should be that the Rules should be readily understandable by ordinary lawyers and advisers. That is not the case at present”5.
The Home Office also announced in October 2017 that the Law Commission had been requested to review the Immigration Rules and advise on how best to simplify these. The Commission has outlined the following:
“They (the Immigration Rules) are widely criticised for being long, complex, and difficult to use. They total 1033 pages in length. Statements of changes to the Rules are now frequent and detailed. Between 2012 and 2016, for example, and driven mainly by the introduction of a “points based” immigration system, the Rules increased in length by about 25%. It has also been suggested that the Rules are poorly drafted.”6
Those seeking to apply under the Tier 1 (Entrepreneur) route and those advising in this area should therefore take great care to understand the relevant Immigration Rules and the evidence that is required in support of applications. This category of the Immigration Rules is no exception to the cases under the PBS, which were under consideration in the judgments cited from above. The onus is generally on applicants to demonstrate their meeting the relevant criteria and the Home Office does not generally adopt a flexible or sympathetic approach and will readily refuse applications on mere technicalities, with very often drastic consequences for the applicant.
1Note that this piece of guidance does not appear to have been updated, as at the time of publishing, from the changes in the Immigration Rules brought about on 6th July 2018. It is best however to check the government’s website directly when needing to consult the guidance.
2For a definition of ‘public funds’, see paragraph 6 of the Immigration Rules and for further clarification as to what is meant by ‘having recourse to public funds’, see also paragraphs 6A-6C.
6Thirteenth Programme of Law Reform – Law Com No 377 – 8th November 2017 – https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2017/12/13th-Programme-of-Law-Reform.pdf §2.35