New Immigration Rules (March 2019) – Introduction of the Start-up and Innovator categories

On 7 March 2019, the UK government published its statement of changes to the UK Immigration Rules.

Major changes include the abolition of the Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) categories and the introduction of the "Start-up" and "Innovator" categories.

The UK government’s stated aim in introducing the new categories is to ensure that applicants under these categories are genuinely engaged in business in the UK.

These new changes will take effect on 29 March 2019 and will apply to all new applications on or after this date.

We set out below details regarding the Start-up and Innovator categories.

Overview

Applying under the Tier 1 (Entrepreneur) category involves a single application.

The new Start-up and Innovator categories will involve a two stage application process, similar to the Tier 1 (Graduate Entrepreneur) category.

Applicants will first need to apply to a relevant endorsing body which will assess their business plan.

Provided an endorsement is granted, applicants can then submit their UK immigration permission application to the Home Office. When deciding applications, the Home Office reserves the right to make its own credibility assessment in relation to the individual and their business plan.

It is important to note that on the basis of the way the new Immigration Rules are drafted, it appears to suggest that applicants will only be able to establish new businesses rather than join existing businesses, which is possible under the Tier 1 (Entrepreneur) category.

Start-up category

The Start-up category is for applicants who wish to establish a business in the UK for the first time and, provided their application is successful, they will be granted a visa for two years.

It is not possible to extend this visa and time spent in this category does not lead directly to settlement (also known as Indefinite Leave to Remain and Permanent Residence).

The aim of this visa is to provide a route for applicants to progress into the Innovator category.

Requirements

  • English language: Unless the applicant is a national of a majority English speaking country or has a qualifying degree taught in English, they must pass an approved English language test at level B2 or higher of the Common European Framework of Reference of Languages. This is one level higher than the English language standard for Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) applicants.
  • Maintenance: Applicants must hold funds of at least £945 for 90 consecutive days prior to the application date.
  • Endorsement: Applicants must obtain an endorsement from an endorsing body listed on the gov.uk website and provide a support letter from the body. The endorsing body will assess the applicant’s business plan and provide a letter stating that the business meets all of the following criteria:
    • innovation - the applicant’s business plan is genuine, original, meets market needs and is competitive in its market;
    • viability - the applicant has the knowledge, experience, skills and market awareness to successfully run their business; and
    • scalability - the applicant’s business plan can create market growth and job creation in the UK.

Innovator category

The Innovator category is for more experienced business people who wish to establish a business in the UK and provided their application is successful, they will be granted a visa for three years.

After three years under this category, the applicant can apply for settlement, provided certain requirements are met.

Alternatively, if the applicant cannot meet the settlement requirements, they may continue to extend their visa by another three years. There is no limit to the number of times they can extend this visa until they are eligible for settlement.

Requirements for an initial application, or an extension application, where the applicant is pursuing a different business venture from the business proposed at the initial application

  • English language (as specified above for the Start-up category).
  • Maintenance: (as specified above for the Start-up category).
  • Endorsement from an endorsing body (including a support letter from the body, as specified above for the Start-up category).
  • Additionally, the applicant must have funds of at least £50,000 available to invest in their business – this is a significant reduction from the £200,000 required under the Tier 1 (Entrepreneur) category. This requirement is waived if the applicant is switching from the Start-up category and has made significant achievements in accordance with their business plan.

Requirements for an extension application where the applicant is pursuing the same business proposed at the initial application

The applicant must:

  • obtain an endorsement letter from the endorsing body which sets out the following information:
    • the applicant has shown significant achievements when assessed against the business plan;
    • the business is registered with Companies House and the applicant is a director of the company;
    • the business is active and trading;
    • the business appears to be sustainable for at least the next 12 months based on its assets and expected income compared to its current and planned expenses;
    • the applicant has demonstrated that they are actively involved in the day-to-day management and development of the business;
    • the endorsing body is reasonably satisfied that the applicant will spend their entire working time in the UK to continue developing their business; and
  • meet the maintenance requirements, as specified above.

Requirements for settlement

The applicant must:

  • obtain an endorsement letter from the endorsing body which contains the information set out above. Furthermore, the letter must also confirm that the applicant’s business also meets at least two of the following requirements:
    • at least £50,000 must have been invested into the business and actively spent in accordance with the business plan;
    • the business must have created the equivalent of at least five full-time jobs for resident workers that have an average gross annual salary of at least £25,000 (this includes individuals who are British citizens, those who have settled status, EEA nationals under the EEA Regulations, British overseas territories citizens and Commonwealth citizens who are in the UK under the UK Ancestry category);
    • the business must have created the equivalent of at least 10 full-time jobs for resident workers;
    • the business must have generated a minimum annual gross revenue of £500,000 in the last full year as shown in its latest accounts, with at least £100,000 generated from exporting overseas;
    • the business must have generated a minimum annual gross revenue of £1m in the last full year as shown in its latest accounts;
    • the business must have engaged in significant research and development activity and must have applied for intellectual property protection in the UK;
    • the number of clients the business has must have at least doubled within the most recent three years and must be currently higher than the mean number of clients for other competitive businesses;
  • meet the maintenance requirements, as specified above;
  • meet the "Knowledge of Life in the UK" requirement by passing a "Life in the UK" test; and
  • meet the residence requirements which state that the applicant must not be outside the UK for more than 180 days in any rolling 12 month period during the three years prior to the date the application is submitted.

Endorsing bodies

To qualify as an endorsing body, the organisation must meet all of the following requirements.

1.  It must be one of the following:

  • A UK higher education institution which meets both of the following criteria:

    • The institution is a UK recognized body or a body in receipt of public funding as a higher education institution from the Higher Education Funding Council for England or Wales, the Scottish Funding Council or the Department of Employment and Learning in Northern Ireland; and
    • The institution has processes in place for identifying, nurturing and developing entrepreneurs.
  • An organisation which meets both of the following criteria:
    • The organisation has a proven track record of supporting UK entrepreneurs, including resident workers, or is a new organisation set up for this purpose by another body which has its own track record of supporting UK entrepreneurs; and
    • The request to become a supporting body is supported by a UK or devolved government department as being clearly linked to the department’s policy objectives.

2. The organisation must be able to competently assess an applicant’s business plan.

3. The organisation must keep in contact with the applicant and follow-up with the applicant at six, 12 and 24 month checkpoints after their application is granted. It must inform the Home Office if the applicant has not made reasonable progress with their original business venture, the applicant is not pursuing a new business venture or if the applicant misses any of these checkpoints without authorisation from the endorsing body.

Credibility assessment

When considering applications, the Home Office will apply a credibility assessment, which has similarities to the current Genuine Entrepreneur Test under the Tier 1 (Entrepreneur) category. 

When undertaking the credibility assessment, the Home Office must be satisfied that:

  • the applicant genuinely intends to undertake, and is capable of undertaking, the business activity specified in the business plan; 
  • the applicant does not intend to undertake any work in the UK apart from their business venture(s); and
  • where applicable, the money made available to the applicant is genuinely available and the applicant intends to use it for the purposes described in the business plan.

In addition to the endorsement, the Home Office may also take into account:

  • the credibility of the evidence submitted by the applicant;
  • the applicant’s previous educational, work and immigration history; 
  • the applicant’s declarations to other government departments in terms of their previous employment and other activity in the UK; and
  • any information it deems relevant.

The Home Office can request additional information and/or ask the applicant to attend an interview, which will form part of its credibility assessment.

Commentary

With the introduction of the Start-up and Innovator categories, the Home Office is signaling that it is moving away from the objectivity of the Points-Based System as it is clearly applying a greater deal of subjectivity when assessing applications under these categories.

The reduction of the investment funds required, from £200,000 under the Tier 1 (Entrepreneur) category to £50,000 for the Innovator category, should make it easier for entrepreneurs to qualify under this category. 

When applying to extend under the Innovator category, there is no requirement to have invested the funds or to have created any jobs, which are both required under the Tier 1 (Entrepreneur) route.

The Innovator category does allow applicants, who meet the requirements, to settle after completing three years under this category. However, in order to be granted settlement, the applicant must meet more stringent requirements when compared to the Tier 1 (Entrepreneur) category. 

At the moment, the Home Office has not provided any details about the organisations which will be granted endorsing body status. It is expected that those universities that are currently endorsing bodies under the Tier 1 (Graduate Entrepreneur) route will be endorsing bodies for the Start-up category. A concern is that there currently only appears to be one organisation, Tech Nation, which has been granted endorsing body status on behalf of digital technology entrepreneurs. However, they are only accepting applications from September 2019. Consequently, it is possible that individuals will not be able to apply under this route until there are relevant endorsing bodies available to support their application.

There are still a large number of questions regarding how the Start-up and Innovator categories will operate in practice, for example, precisely what criteria/evidence the endorsing bodies and the Home Office will take into account when assessing the business for endorsement or when applying its credibility assessment. It is hoped that these questions will be addressed when the Home Office publishes its guidance on these routes on 29 March 2019.