Stricter definition of ‘active and trading UK registered company’ difficult to verify based on public information
Under the introduced changes to the UK immigration rules, which came into force on 29 March 2019, individuals who enter the UK as Tier 1 (Investor) migrants can only invest in "active and trading UK registered companies". Investments in UK government bonds will no longer be considered as qualified investments.
Previously, the definition prescribed that in order to satisfy the requirements of ‘active and trading UK registered companies’, the companies must have:
- had a registered office or head office in the UK;
- had a UK bank account showing current business transactions; and
- been subject to UK taxation.
When considering this definition, Tier 1 (Investor) migrants were taking the view that, if a company had a registered office or head office in the UK and was listed on a UK stock exchange, it must have a UK bank account and be subject to UK taxation, and therefore investment in such company would be considered as a qualified investment.
However, the Home Office has tightened the definition to the effect that it now states that an "active and trading UK registered company" must:
- be registered with Companies House in the UK;
- be registered with HM Revenue and Customs for corporation tax and PAYE;
- have accounts and a UK business bank account, both showing regular trading of its own goods or services; and
- employ at least two UK-based employees who are not its directors.
This narrower definition has led many investors to reconsider their assumptions about UK companies, in particular publicly listed companies. It is practically impossible to determine whether such companies meet all these requirements on the basis of the information, which is made publicly available. For example, it is impossible to know whether a listed company employs at least two UK-based employees who are not the company’s directors. In fact, it is common for a listed company to sit at the top of a potentially complex group of companies, within which that company may not itself be a trading entity. In addition, this company may not have any employees except for its directors.
The Home Office has clarified that the change in the definition was intended to allow it to seek further assurances in case an investment into a company gives cause for concern around its genuineness as an active and trading UK entity. Where a company has a publicly confirmed status as a major listed UK company, with nationally significant operations, it is very unlikely that the Home Office will request further evidence to show that it is active and trading.
Accordingly, provided that the listed company is registered with Companies House in the UK; is not undertaking an activity which is prohibited under the immigration rules, such as investing in property; and if it does not have employees itself but has employees in other companies within its structure, it will be deemed to be a qualifying investment under the UK immigration rules.
This will come as a relief to Tier 1 (Investor) migrants and wealth managers who operate investment portfolios on their behalf as it will be one less thing for them to worry about as they handle the other requirements and restrictions relating to the investments under the Tier 1 (Investor) route.
In accordance with the latest Home Office regulations, a UK regulated bank who is an eligible custodian bank for the purposes of the Tier 1 (Investor) is defined as a UK-based FCA regulated financial institution. It does not therefore need to be a bank but could simply be a wealth management company. However, it must be authorised to hold and control clients’ assets and money.
For example, a bank can simpy have a London branch, but not exactly UK-based. This bank may have a wealth management company in the UK however, it is not authorised to hold and control clients’ assets and money.
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