Policy 8: Reform the Tier 1 Investor Visa by lowering the minimum qualifying investment threshold for investment in UK startups, scale-ups and venture capital funds
In collaboration with The Coalition for a Digital Economy (Coadec), we have produced a manifesto to make Britain the best place in the world to start and grow a business. It features 21 policies across three key policy areas: access to talent, access to investment, and regulation. We’ll be sharing a policy every day on our blog. To read the full manifesto, click here.
The Tier 1 Investor Visa grants the right to live and work in the UK to any foreign national who makes a qualifying investment of £2m or more in the UK. Until recently, the most common form of investment for Tier 1 Investors was in gilts. However under new rules, investments in government bonds no longer qualify. This follows a change in 2014 that prevented investments in property from qualifying. While the rules have encouraged Tier 1 Investors to invest in share capital, the vast majority are investing in established FTSE 100 companies.
In order to promote job creation and innovation in the UK, the Tier 1 Investor Visa should be reformed to direct more capital into startups and scale-ups. Governments have developed multiple targeted tax reliefs such as SEIS, EIS, and Venture Capital Trusts to incentivise investment in higher risk, early stage ventures. Due to the substantial tax relief on offer, the schemes are closely monitored and feature a principles-based risk-to-capital test, alongside restrictions on investments from connected persons, such as relatives or employees.
To promote investment into UK startups and scale-ups, the government should relax the minimum qualifying investment threshold for the Tier 1 Investor Visa for any investments into Venture Capital Trusts and businesses that would qualify for either EIS or SEIS tax relief. A higher threshold should be maintained for lower risk investments.
The government should also remove additional barriers to foreign investments in risk capital. The requirement to top up an investment if the value of an investment declines, pushes investors towards low-risk investments. In the case of a struggling startup, this requirement could swiftly become prohibitively expensive.