Tier 1 Investors: are you caught in the Corporate Bond trap?
As is well known, Tier 1 (Investor) visa holders must, within 3 months of entering the UK, make a substantial financial investment by purchasing UK Government bonds, share capital or loan capital in active and trading UK registered companies. Many Tier 1 (Investor) visa holders, seeking to balance risk and return, invest wholly or partly in UK Corporate Bonds, often on the advice of investment managers. However few, it would seem, are aware of a provision of the Immigration Rules which, unless addressed carefully, could result in their extension or settlement applications being refused.
What is a ‘Corporate Bond’?
A Corporate Bond is a bond issued by a company and sold to investors. Investors who buy Corporate Bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures. Companies use the proceeds from bond sales for a wide variety of purposes, including ongoing operations, financing mergers and acquisitions or to expand business. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations.
What does the Home Office say about Corporate Bonds?
Neither the Immigration Rules, nor Home Office policy guidance, expressly refer to Corporate Bonds.
The Immigration Rules do state at Tables 8A, 8B, 9A and 9B of Appendix A that an investment by way of ‘loan capital in active and trading UK registered companies’ will constitute a qualifying investment and it is uncontentious that UK Corporate Bonds fall within this definition.
However, a Tier 1 (Investor) who purchases Corporate Bonds as all or part of their qualifying investment will only qualify for an extension of stay or settlement if they are able to evidence the bond purchase in the way required by the Immigration Rules. This brings us to paragraph 65-SD of Appendix A to the Immigration Rules, which sets out the documents that must be provided as evidence of the investment.
Paragraph 65-SD(a) of Appendix A states that individuals applying for an extension of stay or ILR as a Tier 1 (Investor) must provide a series of investment portfolio reports, certified as correct by a UK regulated financial institution. The sub-paragraph goes on to set out various evidential requirements that the investment portfolio reports must satisfy.
Then, hidden part-way through a section of the rules dealing otherwise exclusively with investment portfolio reports, paragraph 65-SD (a)(vii) of Appendix A, states:
65-SD (a)(vii) for investments made as loan funds to companies, be accompanied by audited accounts or unaudited accounts with an accounts compilation report for the investments made, giving the full details of the applicant’s investment. The accountant must have a valid licence to practise or practising certificate and must be a member of the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants in Scotland, the Institute of Chartered Accountants in Ireland, the Association of Chartered Certified Accountants, or the Association of Authorised Public Accountants, the Chartered Institute of Public Finance and Accountancy, the Institute of Financial Accountants, the Chartered Institute of Management Accountants, or the Association of International Accountants;… READ FULL ARTICLE